12 Things That You Can Do To Improve Your Finances Now!

12 things to do for improving your finances

1. Create A Balance Sheet

Begin and look at your net worth by collecting your most recent investment statements and going online to retrieve your current account balances.

Once you’ve documented your assets and subtract your liabilities, consider the following questions:

  • Does any one financial asset consume a disproportionate share of your net worth?
  • Are your assets properly insured?
  • If you’re still working, do you have enough funds in place to cover your living expenses for six months or more?
  • If you’re currently retired, do you have enough assets in highly liquid investments to cover two years’ worth of expenses as well as any emergencies or home and car repairs?
  • How does your net worth compare with what it was at this time last year?
  • How does your current debt load compare with what it was a year ago?

2. Round Up Your Tax Information

Tax season just passed, but getting organized early will make next year  tax season much less painful. And if you don’t do your own taxes, your accountant will thank you.

3. Re-Check Your Assumed Goals

Take a close look at the assumptions you’ve made regarding your ability to reach your goals.

Re-evaluate:

  • your time horizon (your retirement date, for example)
  • your savings rate
  • your asset allocation
  • your withdrawal rate

To help assist in your analysis, turn to online financial calculators to re-assure you are on the right track.
4. Set Up A Budget

This is probably the most important part of a financial makeover. You need to save more and spend less in order to reach your investment goals. With the economy in bad shape, a lot of people have determined that the best way to get ahead is to do it the old-fashioned way: SAVE MORE.

First analyze your spending patterns. Track your expenses for a month or two using a program like Quicken or on a spreadsheet, or even monitor your spending manually. Group your current monthly expenditures into two key categories:

  • nondiscretionary (such as your mortgage, utilities, and taxes)
  • discretionary (clothing, lattes)

Take a moment to review whether your spending habits with your life goals. Also, take a good look at the discretionary spending for items you can cut out or do without completely. Use that information and create a monthly budget that includes an aggressive savings tactic.

5. Place Your Investments On Automatic

Once a budget is created, it’s time to put your savings plan into action. Use the “auto-invest” option to contribute to your taxable investment accounts or retirement plan on a monthly or bi-monthly basis. Such a program helps ensure that you’re putting money to work in bad markets as well as good ones.

Build an emergency fund – A job loss, pay cut can reduce your income and expenses that are unanticipated can hit you without warning (a car or home repair or a medical bill ) they are the easiest ways to put your budget of course. The best way to keep things on track is to make sure you have an emergency fund in place, which is three to six months’ worth of basic living expenses held in highly liquid investments.

6. Get Estate Planning Done

If you don’t have an estate plan in place, it’s time to get one. And you should also be re-examining your estate plan about every five years to keep your plan in sync with tax-law changes and major life events.

Start by identifying an attorney who specializes in estate-planning matters. Also, begin itemizing your assets; if you created a personal balance sheet , you’re well on your way. What’s considered a taxable estate is apt to change in the years ahead, but no matter your asset level, you still need an estate plan to spell out who you would like to care for your children should something happen to you, who you would trust to make health-care and financial decisions on your behalf if you were unable to do so, who you want to serve as executor of your estate, and so on. After your attorney has drawn up your estate plan, don’t forget to take the next step and update your beneficiary designations.

7. Re-visit Insurance Needs

More than half of financial success is finding a way to sidestep, or at least minimize, disasters. Putting in place an emergency fund, which you did back in May, is one way to do that. Another way is to make sure that you’ve purchased adequate insurance coverage. This article reviews some of the basic insurance types that most individuals need, while this one covers longevity and long-term care insurance.

8. Become Organized

Most people hang on to way more paperwork than they need to, particularly given that so much of this information is available online now. Start by making sure you have a good understanding of what to keep and what to toss. Keep: important documents like marriage and birth certificates (preferably in a safe-deposit box), as well as tax returns for the past seven years. I also like to hang on to receipts and documentation for big-ticket items. Toss: the many extraneous items that accompany your investment statements, such as marketing materials.

While you’re getting organized, look into managing your accounts and receiving statements online. If you’re not ready to go electronic, create a logical filing system for your paperwork. The key is to create a system that would be understandable to someone else. Also create a “cheat sheet” with all of your account numbers, passwords, contact people, and phone numbers. Keep it in an ultrasafe place and make sure someone you trust knows where to find it.

9. Create A System to Tracking Cost

Tracking your investment-cost basis isn’t fun or simple, especially if you dollar-cost average or reinvest your dividends and capital gains. But keeping good records of your purchases, sales, reinvested dividends, and capital gains can give you greater control over your investment-related taxes. Some investors use spreadsheets to document their purchase prices and reinvested dividends and capital gains. Your brokerage firm or mutual fund company may also provide this information on your statements or online; if they don’t, you can call and ask for your purchase-price history along with any reinvested dividends or capital gains.

10. Keep On Track For Retirement

If you’re not yet retired, you should be maxing out your tax-sheltered investments by the time you’re in your 40s.

So, take a look at your tax return, see what your maximum contribution limit is for the year, and try to contribute as close an amount to the maximum as you can.

11. Check Up On College Funding

Are you on track for retirement? If not, you can skip this step. That may sound harsh, but the reason is pretty straightforward. Your child or grandchild can get a loan to pay for school, but no one will give you a loan to pay for your retirement.

If your retirement assets are in good shape, you can investigate the various vehicles for college funding.

12. Final Check Of Your Investments

First, take a look at how your investments have done. If you’ve sold stocks or funds and realized a gain, pat yourself on the back. Then look through your portfolio for losing holdings that you can sell to offset those capital gains.

Overachievers among you may also want to combine tax-loss selling with rebalancing, assuming your stock/bond mix is out of whack with your asset-allocation targets. Restoring your asset allocation so it’s in line with your targets will help improve your portfolio’s risk/reward profile. To minimize the tax effects of rebalancing, concentrate your rebalancing efforts in your tax-sheltered accounts. If your asset allocation is still off kilter, consider adding new assets to restore balance. If you must sell securities from your taxable account to restore balance, try to identify some losers to offset the winning holdings.

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