Managing your financial life is not a “set it and forget it” exercise. You must take a comprehensive view and stay engaged. As you work through the process and become more conversant with concepts, many financial truths are worth remembering: The importance of time: Compounding is powerful. The importance of risk and return: There are many types of risk. The importance of discipline and conviction: Stay true to your plan. The importance of patience: Study your investment decisions and don’t rush. The importance of value: Value is not what you paid for something. It is what someone else is willing to pay for it. The importance of supply and demand: Both have an impact on value. The importance of expectations: They also drive value. The importance of liquidity: How easily something can be converted to cash is key. The importance of total return: Look at both appreciation and income. The…
Prepare an ICE Plan
With an In Case of Emergency or ICE plan, you assemble key contact and financial account information in one place. An ICE plan guides someone who must act on your behalf—it is like a roadmap of your financial life. If you use a web-based personal financial management service, you have a great head start. To create an ICE plan, prepare a list of: Bank accounts, credit card accounts, retirement accounts, brokerage accounts, and any other investments The name and phone number for anyone who helps you manage your financial life—banker, insurance agent, accountant, investment adviser Details about your lease or your mortgage—the name of your property management company or mortgage company Bills that are on automatic pay, with passwords to access the accounts or the master password if you use a password management service For someone just starting out, your retirement account is likely your most valuable asset. As you…
Spring Cleaning for Your Files
As most of us shelter in place, we are tackling projects around the house. This is the perfect time to clear out our home offices. I like to call it a financial spring-cleaning. Just like when you go through your closet or food pantry to determine what to keep, what to donate, and what to toss, you need to do the same with your financial life. Perhaps even more important than what you keep is what you can shred, recycle, or delete. Keeping unnecessary documents and statements makes it harder to locate important information in a hurry. Most of us waste a lot of time trying to find things on our computer and amidst our papers. Getting rid of unnecessary documents frees up precious space in your file drawer and on your hard drive. Keep both a recycle bin and a shredding bin near your desk or wherever you pay…
Create an ICE File
An In Case of Emergency, or ICE, file contains key documents that are easily accessible to you or someone acting on your behalf. If you need to leave your house or apartment quickly, it is beneficial to have your most important documents all in one place so that you can easily access them as you leave your home. At the least, include the following items in your ICE file: Legal documents, such as wills, powers of attorney, health care directives, and the titles for your home and car Vital records, such as birth certificates, adoption documents, marriage certificates, Social Security cards, and military records Copies of passports, credit cards, and driver’s licenses After you have gathered your essential documents, you need to put them in a safe place. Keeping these important papers in one location will save you a lot of time and makes it easier for someone who might…
Focus on Your Net Worth
Managing your financial life involves making a lot of decisions. When the dollars involved are material, you should always think about the repercussions for your net worth. This practice will have a profound impact on your long-term financial well-being. In Accounting 101, you learn about a balance sheet. A balance sheet is a financial statement that lists your assets, your debts, and your net worth. Your assets are anything you have of value, such as your home, bank account, investments, 401(k), and car. Debts include any outstanding liabilities or obligations such as a mortgage, student loans, car loans or leases, and credit card debts. Your net worth is the difference between your assets and your debts. In other words, your net worth is an outcome, and you can think of the formula: Assets – Debts = Net Worth If the total value of your assets is higher than the total…
Evaluate Your Creditworthiness
Building good credit is essential. You can pay for large expenditures over time using student loans, mortgages, and car loans and leases, but how you handle these and other debts has a significant impact on your net worth. Also, how you manage these debts plus credit cards and cellular and utility bills has a profound effect on your credit score. Credit scores range from 300 to 850. In general, scores above 700 are good, and scores above 800 are excellent. Not only does your credit score determine your interest rate, but it also determines whether or not you will be able to get credit if you need to borrow. Keep in mind that each lender has different requirements for a minimum credit score that they will approve for potential borrowers. Depending on the lender and the type of loan you are requesting, being in the “Good” range may not be…
Spend Less; Save More
Finding ways to save more starts with finding ways to spend less. Analyzing where your money goes every month is a great place to start. Take a close look at your non-essential expenses or “wants.” These are often tied to lifestyle choices. Reducing non-essential outlays will free up cash you can use to pay down debt, shore up emergency fund reserves, and save for retirement. Articulating a plan and exercising discipline increases the likelihood that you will attain your goals. Analyze Your Spending There are a vast number of personal finance websites and apps. Linking your transaction activity to one of the tools helps track your spending on a real-time basis – overall spending levels, spending by category, etc. There are also data security considerations. If you choose a website or app, select a leading one with excellent security. Whereas I am in favor of budgeting tools to analyze spending,…
How Much Coverage?
It is a new year and a new decade. Resolve to get your financial house in order. Making sure that you have adequate insurance should be an item on your “to-do” list. The nonprofit Life Happens teaches people about life insurance and disability insurance. When it comes to insurance, there are many considerations. Your situation and life stage are unique. The site offers calculators so consumers can determine but how much coverage they require. Being thoughtful about your insurance needs helps protect your loved ones and your budget. Check out the site LifeHappens.Org
Advice For Women to Keep Money Secure
Very helpful money advice for women from women. Thanks to Karen Doyle @KarenDoyleScit @GOBankingRates for featuring me along with @bobbirebell and @NicoleMiddendor. Women must be engaged in their personal finances. Advice for Women to Keep Money Secure
Financial Caregivers’ Roles
Have you been asked to serve as a financial caregiver? Are you considering asking someone to serve as a financial caregiver for you or a loved one? The Consumer Financial Protection Bureau (consumerfinance.gov) offers four free guides explaining what it means to serve as a trustee, power of attorney, guardian of property, and as a government fiduciary (for Social Security and VA benefits.) A common trait across these types of financial caregivers is that involve a fiduciary duty. These four guides explain fiduciary duty and offer helpful suggestions on how best to serve in these roles. Guides for Different Types of Financial Caregivers