We have all heard of the honey do list. Lots of honey do tasks are being completed due to the pandemic and people spending more time at home. But have you heard about the money do list? That’s right, just like the honey do list for home tasks, you should have a money do list for your finances.
The money do list will vary from household to household and your list will not look like your friend’s list. So, what’s on this money do list? First of all, some things are monthly, others are annual, or in between. The following is a selection of topics to get you started.
Annual
Goals – pick a month each year and schedule a review of your goals. You should review your short-term, intermediate, and long-term goals. If you are on-track and your goals have not changed, that’s great! If you are woefully behind, no longer interested in the goal, or just not inspired, take the time to figure out why. Remember, it’s ok to change your goals as your life, resources, options, and priorities change. Just be aware of the changes and take appropriate action.
Annual balance sheet – corporations use a balance sheet to monitor progress and so should you. Preparing an annual balance sheet lets you know where you stand. It reveals what you owe, and what you own. Preparing a personal balance sheet is very simple. In one column, total up all of your assets such as home equity, savings, checking, and investments. In the next column total up all mortgages, lines of credit with a balance, credit cards, student loans, anything you owe. Now subtract the liabilities from the assets to determine your personal net worth. Hopefully you have a positive net worth. If you do not, you either have an error, a cash flow problem, or a spending problem. Either way, time to get help by calling a professional.
Insurance review – this needs to be done annually, although you may experience a life changing event that will precipitate an immediate change to your insurance.
Auto and home insurance should be reviewed with an eye toward appropriate coverage and any potential discounts you are due from your provider. For example, a discount for the number of cars you have insured, or for having home and auto with the same agent. About every 3-to-5 years your home owner’s insurance needs to be reviewed to make sure you are adequately covered for the increase in home value should your home be destroyed and you need to rebuild. You should also be sure your umbrella policy is sufficient.
Life and health should be reviewed for coverage need and cost. If you have an expensive whole-life insurance policy you no longer need, talk with your adviser about current coverage needs. You could be at a point where converting to a term policy may make sense. If you have no coverage, you need to assess your risk and find out if you need coverage and how much. The same with your health insurance. It should be reviewed to make sure the coverage you have is the coverage you need and that you are not overpaying.
Estate planning – review your estate planning documents every 3-to-5 years. You want to make sure your executors, trustees, and beneficiaries are still current and as you desire. You should also review for any desired changes to your estate plan. For example, are you adding someone special as a beneficiary? Are you cutting someone out of your estate plan? Have you changed your mind about health care decisions? If you do not have an estate plan in place, get one! Estate plans are not only for the wealthy.
Retirement – review your retirement statements, goals, and resources. Are you using an employer plan to save? If so, be sure it’s set to auto-increase at least 1% annually. Do you have capacity to save outside of retirement in a taxable account or in an IRA? No one ever got to retirement and complained that they saved too much money. They have complained about their tax situation so you should consider your mix of savings options and discuss the Three Buckets with a financial planner.
My Social Security – visit the Social Security site at ssa.gov and register for My Social Security. Review your name, earnings history, and projected benefit to make sure everything is correct. Knowing this information can help reduce surprises in the future when it’s time to retire. You can also track your earnings over your life and make a more informed decision about when to draw, and for what type of benefit you are eligible.
Monthly
Budget – review your spending regularly. If not monthly, at least quarterly. Know what is coming in, and what is being spent. Just tracking your spending will make you more aware of your money habits. You can use free apps, an online tracker, Excel, or old-fashioned pen and paper. Just keep a log of everything spent, tally up by category, and see how much you are spending and on what. If you are spending too much, implement PERK!
Credit cards – review your credit card statements monthly. This can be done in conjunction with your budget review to make sure the charges you are paying for are indeed your charges. You should also look for services that are on auto-bill for which you are no longer using, and cancel them.
Checking and savings – review your checking and savings account statements. Most are electronic these days and the need for balancing a physical check register is minimal. You should review your online activity and make sure you are maintaining a sufficient balance to avoid unnecessary charges from your bank. As with credit cards, check to see if there is anything being automatically deducted from your account that should not be. Many banks offer tiered savings and a higher rate of interest paid for each tier. See if you are close to a higher tier of interest and aim to add to your savings to hit that target.
Utilities – this is one many people forget! Check to be sure your utilities are in line with your historical averages. If you see spikes in say your water bill, or cell phone bill, investigate and find out why. It could be a lapsed payment, a new service added that you didn’t request, or a policy change. One culprit is streaming and cable services. Frequently we forget that a promotional period is ending and the higher charge has commenced. If you don’t need the service, cut it!
Bi-annually or more often
Emergency fund – review your emergency fund at least bi-annually, more if your financial responsibilities have changed. You want to make sure that you are on-track with saving the right amount, or that your fund matches your current needs. Remember, at minimum, a dual-income household should have 6-to-9 months cash on hand, and a single-income household should have 9-to-12 months cash on hand. Twelve months of cash is always a bonus!
Investments – take stock of your investments at least twice a year if not more. You want to make sure the allocation is still in line with your goals, and that you are in the appropriate investment vehicles. You should also keep an eye on transactions to be sure you requested said transaction, and monitor contributions (yours as well as your employer’s).
Credit report – pull your credit report at least twice a year, even three times a year. Just review it to look for errors. Make sure all of the lines of credit being reported are yours, and that they are being reported properly. If you see an unknown account, get on it immediately and alert the credit bureaus. Find out what it is, who opened it, when, and if it is not yours, start the dispute process. Knowing your credit history and checking it periodically is a great way to keep it in mind when spending. Being aware will help you build a better score.
The above are just a few of the items on your money do list. You can break these into smaller lists, add items that are important to you, or create your own. The point is, your finances shouldn’t be an afterthought.
As an independent Certified Financial Planner™, I can help you work through your money do list. Contact me and let’s get started! #talktometuesday #Hireaplanner #income #cash #CFPPro #foundmoney #pandemic #MoneyDoList #MoneyDo #security #finances #financialplanning