No
one likes to be blindsided by financial hardship. Listed here are 10 ideas to
help ensure your financial situation stays healthy.
- Create a safety
net.
Plan to have a minimum savings balance to cover at least three months' of
expenses (ideally, this should be six to 12 months). If your reserves are
light, start saving now. Even if it is a little amount, it can get you on
the right track.
- Develop a budget. At least once a
year develop a basic budget. Set goals and try to hit them. If this seems
overwhelming, start simple. What is coming in and what goes out each
month? Becoming aware is the first step to improving your financial
health.
- Make your spouse a
financial partner. If you die, does your significant other
know where everything is? Can he/she pay the bills? Does he know where
account numbers are? Does your spouse know who you use to help with
things? If not, it is time to start talking.
- Review your beneficiaries. Once a year
review beneficiaries on all accounts. This includes retirement accounts as
well as names on wills and estate plans. The legal hassle created without
this review can be devastating to your surviving family. This is
especially important if you had a recent life event (marriage, divorce,
birth or death).
- Maximize your
benefits.
Make sure you review your retirement plans to maximize any employer match
in your account. Also review your plan's administrative expenses. If they
are too high they can cost you thousands of dollars over your lifetime.
- Create a disaster
plan.
If your home burned down or was flooded, are your important records easily
accessible and protected? If not, consider creating a disaster plan. This
may include placing important documents in a safe deposit box in another
location than your home.
- Review your credit
report.
With the recent increase in identity fraud, plan to check your credit with
the major credit agencies once a year. The agencies are legally required
to make their report available to you annually without charge.
- Review your
insurance plans. Periodically look at your health, life, home and
liability insurance. With the legal nature of our society, you might
consider the need for an umbrella policy to cover against potential
litigation. But also consider flood insurance and a replacement value
homeowner's policy.
- Manage your debt. Review your use
of credit cards, loans, etc. Understand your net worth (assets minus
liabilities). Make progress in reducing your debt load starting with the
highest interest obligations first. Is your debt lower than it was last
year?
- Plan for fun. Just because you
are taking steps to improve your financial situation doesn't mean that you
can't have fun. Be smart about your entertainment spending. If you are
planning a vacation, research money-conscience options and have a budget
that fits in with your other financial goals.
This
list is by no means complete, but if you focus on the areas mentioned, your
financial life will become more planned and less likely to be struck by an
unforeseen surprise.
