Personal Finance

Managing your personal finances is the first thing you need to get a handle on so you can invest. Below are some terms and simple ways to help manage this.

  • Budget – tracking your expenses is absolutely necessary to succeed financially regardless of your income.  This can be done on paper, an excel spreadsheet, online sites, etc.  The goal is to make budgeting as simple as possible so it’s not a burden and is not complicated.  This is mandatory to truly understand where your money is going and maximize your options.  You might be surprised and maybe a little disappointed when you see where your money is going.  Once you start spending intentionally, you will find more value in the purchases that you do make.  Track every dollar! As you earn more it doesn’t mean you have to spend more.  Don’t let your income define your budget. The best way to get a raise is to spend less!  Taken a step further, your first expense should be to your savings account with setting up an automatic monthly transfer. Pay yourself first.
  • Net Worth Statement –add up all your accounts (assets) and then subtract your debts; this is your net worth.   If you have more debt than assets, it could be a negative number.  Your net worth is a better way to track your progress, rather than basing it solely on increasing your income.  If you spend more than you make, your income is irrelevant to your net worth.  Your goal is to grow this number annually.  It is a true measure of how you are performing financially.  Checking this annually is an excellent way to gauge your progress.
  • Debt – debt should be considered an emergency until it is paid off.  There should be no investing other than possibly an employer retirement match until debt is paid off.  A home mortgage may be the one exception.  I agree with Dave Ramsey (national expert on personal finance) that you should eliminate all non-essentials in your life until you have it cleaned up:  no bars and restaurants, travel, vacations, or shopping other than for essentials of food and basic clothing.  This may seem harsh but to succeed is necessary.  The end result is a financial life with less stress and far more opportunities available to you.  Dave Ramsey has a list of baby steps to eliminate debt that can be found at http://www.daveramsey.com and they are an excellent and proven tool.

Financial Plan Checklist

To have a complete look at your personal financial situation you need to have all of the information that is pertinent. Provided below is a financial checklist that can help you put this together.

  • Name/Age/DOB:
  • Name/Age/DOB (spouse):
  • Phone#:
  • Email:
  • Home address:
  • Divorced? How long were you married?
  • Deceased spouse?
  • Children(s) name(s)/Age:

  • Desired retirement date by month/year: Why?
  • Desired spouse’s retirement date by month/year: Why?

  • Current gross/net income:
  • Spouses current gross/net income:
  • Current tax withholding number on W-4: Why?
  • Spouses current tax withholding number on W-4: Why?
  • Current monthly living expenses:
  • Current yearly living expenses that includes bills that only come around once or twice or year:
  • How much are you saving each month when looking at all sources?:

  • Life insurance? What type (whole, term, universal, variable, etc.?)
  • When did you start the policy?
  • How much is the death benefit?
  • Is there cash value? If there is, how much?
  • Yearly premiums?
  • Annuities? Type?
  • Where is it held?
  • Specific name?
  • When did you buy it (month and year)?
  • Qualified (pre-tax retirement account) or non-qualified?
  • How much did you start with?
  • How much do have now?
  • Surrender amount today? Surrender penalties?
  • Yearly premiums?
  • What are the deductibles on the other insurance policies (health, car, home, disability, etc.)?
  • What is the cost of your health insurance?
  • Do you have an HSA? How much is in the account? How much do you contribute annually?
  • Do you have savings at the bank(s)/credit union(s)? How much?
  • Where and type of account(s)?
  • What percentage interest is the account(s) earning?
  • How much do you have in emergency savings? How much do you want?
  • Type of investment accounts (401k/IRA traditional, Roth, non-retirement)?
  • Where and name of fund(s)?
  • How much in the fund(s)?
  • Monthly contribution percentage? Dollar amount?
  • Employer matching percentage? Dollar amount per month?
  • What investments do you hold and what is the expense ratio per fund?
  • Do you own or rent your residence?
  • If you own, what is the value of your home currently?
  • Do you have a mortgage? What is the interest rate? What is the payment?
  • How much do you owe?
  • Are you paying private mortgage insurance (PMI)? If so, how much?
  • What type of debt(s) do you have?
  • Where?
  • Amount?
  • Interest rate?
  • Payment?
  • Paid off date?
  • Do you have a will?
  • Is it updated?
  • Do you have a trust?
  • Are the beneficiaries updated on your retirement accounts?
  • Have you ever completed a net worth statement?
  • Do you have a current net worth statement?
  • If so, what do the numbers say?
  • Where have you picked up your financial education?
  • What books have you read on the subject?
  • What are some basic principles that you believe in when it comes to money?
  • What is your current asset allocation? Spouse?
  • What is your desired asset allocation? Spouse
  • Has this changed over time? If so, why?
  • Do you have a pension?
  • Where?
  • What is the lump sum payout? When?
  • Identify the estimated payments based on age. 62? 65? Other age?
  • Does your spouse have a pension?
  • Where?
  • What is the lump sum payout? When?
  • Identify the estimated payments based on age. 62? 65? Other age?
  • Social Security at age 62: FRA: 70:
  • Social Security Spousal Survivor Benefit on your account:
  • Social Security Child Survivor Benefit on your account:
  • Social Security Total Family Benefit on your account:
  • What is your plan for withdrawing Social Security? Why?
  • Short-term goals:

  • Long-term goals

  • Other information that may be helpful that hasn’t been covered?

ADDITIONAL PERSONAL FINANCE INFORMATION

You can check your credit reports at http://www.annualcreditreport.com.  It is a free service that can be accessed once a year.  There are three reports available from Experian, Transunion and Equifax.  It is recommended to retrieve one every four months.  When you do this, you should check for accuracy and contact that credit bureau to correct mistakes.  Your credit score matters in what rate you may be able to obtain if you need a mortgage or short-term loan. Some prospective employers also use this to assess if you are a responsible person to hire.