Take inventory of your finances – what’s in stock?

By Janice Desautels (photo by Ken Teegardin)

Change is upon us. In April, we can bank on the warmer weather arriving just like we can bank on tax time. The same time every year where we scramble to get ourselves organized to ensure that we are getting the best benefit from our deductions.
To do that, we should be running our personal financial house like that of a business. Ask and answer this question: if the success or failure of your personal life business is determined by how you control expenses and maximize profits, what type of business would you have?
Time to restructure
It’s time to take stock, and unfortunately, we only have ourselves to be accountable to – so how can we make it easier? One way is to first itemize all of the documents that you have, such as investments, savings, loans, insurance policies, benefits and pension information. A one-pager listing the account and plan numbers, renewal dates and tax documents required is one way to get started. Then have a file for each category so that throughout the year, you can easily add to it and it stays organized.
This time of year is also a good time for a review. Below are some ideas to help you get started.
Total the amount of interest you paid in 2014 from all sources of loans and credit cards. Do you want to pay that in 2015? By focusing on the amount of interest, you change the perspective on the debt. Reducing the interest means you are paying off the debt.
Itemize each interest charge and review whether there are more efficient ways to tackle it. For example, the compounding interest on credit card debt can get out of hand fast. Review how much the interest increases or decreases depending on your monthly payment.
Know what you pay and why you pay it.
Are these still in line with your goals – and was the rate of return what you expected? Again, review and understand the charges. Make it a rule to review this with your financial professional twice a year or more especially if your life circumstances are about to change.
Firstly, if you have not spoken to anyone about the need for insurance, please do so. Secondly, if you do have a policy, review this with your insurance professional on a yearly basis as needs change over time. Most importantly, share this information with your family and also the location of the policy so they understand what you have prepared for in the event a tragedy strikes.
Review the type of coverage and limits your benefits provide. Prepare the year to ensure that you take advantage of the full value. Make certain the coverage is still effective and if not, determine whether you need to change or add to your existing benefits.
This is something that is often overlooked until we are ready to retire but that is when it’s too late. Whether this is a savings plan done on your own or through your employer, it is crucial that you take stock of the value at least annually. If it is an employer-sponsored plan, it is important to understand the type, the accruing value and the limits upon retirement.
Review the annual statement to ensure that the correct contributions are being reported. For either plan, it is important to review whether it is fitting into your goals, and if not, how much more do you need to save to fill in the gap?
Janice Desautels has been working with families and individuals for the last seven years helping educate in the field of financial literacy. She is a Certified Financial Educator with over 15 years experience in teaching and training adults.

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