Fall Financial Check-up
Posted by John Draper | Filed under Good ideas, Money Management
Now that the kids are safely ensconced in school, you have a minute or two extra to do some stuff for YOU. While many people consider January 1 to be the start of the New Year, I’ve always felt that September is my New Year. I guess it’s a hold over from getting new school supplies, new clothes, a fresh start on a new school year.
With the holiday season just around the corner, and 2009 a glimmer on the horizon, this would be a good time to do a Fall Financial Check-up to see how you’re doin’, what needs some attention, and what could use a complete overhaul.
Okay, grab a pencil and a piece of paper and answer me a few questions:
- On a scale of 1 to 10 (10 being “ecstatic”) how do you feel about where you are financially today?
- What’s the biggest financial concern you have right now
- What one thing do you want to accomplish before another year rolls past?
If you’re on target, give yourself a pat on the back. If you’re not, give yourself a Gail Hug and know that you can change anything you want about your life, if you want it badly enough.
Time to take a look at your budget and see how the numbers shake out. Often, as we progress through the year and get comfortable living on a budget, we also get complacent and our costs start to rise. Look at your last month’s spending to see if it is still in line with your planning. Is it time to do some trimming? With food and gas prices having risen significantly, do you have to trim in other areas to rebalance your budget? Are there other changes that have taken place since you did your budget that you need to incorporate officially?
Are you on target to be debt free PDQ? I know some people find that it’s hard to even imagine being debt free, but you can be. It may take another job to earn the extra money to get out of debt, but if that’s what it takes, you can do it.
I just finished working with a lovely couple – wait till you see this show, there’s a big surprise ending. I asked Sean to find a way to make another $400 a month that could be devoted to debt repayment. He changed his job – he was working at a hospital and switched departments – and came up with another $1400 a month. And Amanda found a part-time job, aside from the one she was doing at home, to push the debt away even faster. They had a real CAN DO attitude, and just needed a push in the right direction
Is your emergency fund growing? Again, it takes small steps to get to where you want to be. Having three month’s income or six months’ worth of Essential Expenses isn’t a nice to have, it’s a gotta have. I’m just posting the numbers for a family that got way behind several years ago when their young daughter was diagnosed with cancer and they had to go from two incomes to one. If they had had an emergency fund, the damage to their financial picture would not have been so severe, enabling them to find their feet more quickly when the emergency had passed.
Are you taking advantage of a retirement plan at work (and the savings matching program they may offer), or are you using an individual retirement savings plan? If you answer “no” to this question, give your head a shake. How will you eat when it comes time to stop working? How will you keep a roof over your head? If you think your kids are going to take care of you, how would you do right now if your mom and dad showed up on your doorstep?
How are you putting your money to work for you? In other words, what are you investing in, and are those investments still working for you? Are you well diversified? Diversification helps you weather investment volatility because all your money isn’t tied up in one sector, type of investment or geographic location. If your advisor hasn’t reviewed your portfolio with you yet this year, get on the horn. This would be a good time to adjust the investments that may have fallen out of whack with your goals and tolerance for risk.
When was the last time you reviewed your insurance coverage: car insurance, property insurance, life and disability insurance. If you think insurance is a waste of money, how would you cope if the worst did happen? How would your family cope? As if a disaster isn’t bad enough, would it be fair to them to be financially wiped out at the same time?
Do you have a will? Powers of attorney for both personal care and money? And have you named a guardian for your children? Have you reviewed this documentation in the last two years, or since your last major life change (marriage, divorce, moving, birth of a child)? If not, time to dig out the paperwork and have a look to see if it still meets your needs.
It’s easy to put off looking at your money. Put it off. Put it off. Put it off. But you’ll get no peace of mind from not knowing where you stand. Better to grab the paperwork and a cuppa, a calculator or your spreadsheet, and do the detail. While you’re at it, create the checklist you’re going to use next year to make sure you’re covering all your bases.
Bookmark: del.icio.us Digg StumbleUpon
September 5, 2008 at 5:54 pm
Wow. You’ve given me many good things to think about this weekend.
I know there are a few things we still need to get in order.
I’m trying to keep the debt load down. I’d love to pay if off, but it’s going to take time. Once my son is on daycare full time, then I can work more hours to help decrease the debt and increase savings.
I really feel that an emergency fund is priority, but it feels so unattainable sometimes. It could take us years to save 6-8 months worth of living expenses. I’m working on it slowly but surely.
September 5, 2008 at 6:24 pm
Fall is a great time for a check up.
1- Year is not over yet, so there is time to fix things to meet goals.
2- Some people might stop contributing to CPP and EI, so one can decide what do to with the money (RRSP, emergency fund, …).
3- Study the ‘emergencies’ of the year to decide what was overlooked and what was a true surprise before the 2009 budget is sorted.
Financial happiness? Better than last year (net worth looking better each year).
Biggest financial concern? Collective agreement negotiations.
Accomplish? Be ok with the fact that I won’t be done with my student loans by the end of 2008 and that 2009 is good enough. The end is near!
September 5, 2008 at 7:54 pm
Marie – you gave me some insight. My husband’s CPP is paid up now, and soon EI too – so I am going to use that “extra” money for some debts! Thanks for the idea!
September 6, 2008 at 1:31 pm
Great tips Gail! I try to do a monthly checkup and a seasonal check up helps me know where I’m going wrong before it gets too bad! :0)
September 8, 2008 at 11:09 am
How do you stop contributing to CPP and EI?? And how do you know when you’re paid up? I’ve never heard of this?
September 8, 2008 at 11:49 am
Heather, your employer will stop deducting premiums once you reach the maximum earnings for deductions.
The maximum amount for 2008 for CPP is $44900.00 in pensionable earnings for a total of $2049.30 in deductions and EI is $41100.00 in earnings for a total of $711.03 in deductions.
If you have more than 1 job you have to pay the deductions through each employer separately but you can claim back any excess paid on your tax return.
September 9, 2008 at 9:28 am
Now I feel even dumber…I don’t make nearly that much!