We are almost at the mid-way point in 2018 - time for that financial tune-up. We all set goals with great enthusiasm on New Year's Day ("I will lose 20 lbs", "I will save X% of my income", etc.) but then slowly we start missing goals and then drop them altogether.
Let's not allow that to happen, shall we? Here are a few concrete things to do:
Adequate Insurance?
While we all seek to gain and prosper, a crucial thing that we must do is to protect what we do have. Insurance - that perennial drain on household finances - is a necessary evil. Check that you have the appropriate coverage for:
- Home
- Renters insurance
- Auto
- Medical insurance
- Other insurance you may need (business, umbrella, etc.)
Emergency fund tune-up
Is your emergency fund appropriately funded? If not, get this started now. Estimate how many months of zero-income you can sustain? Don't just use simple 3-month or 6-month that you read in blogs/advice columns. Instead, look around you - in your area, in your chosen field, how quickly are people with your skills and age getting hired? The older you are, in some professions, it takes a while (sadly) to land a new job.
Spending Tune-up
- If you have set up budgets, how have you done these last six months? Met targets each month? Missed a few? If you missed a few months, then look through your spending in those months and see what set you off course.
- If you have not set up budgets, this may be a good time to do so.
- For my household spending, I find it useful to compare spending by category year-over-year. Where is spending rising? Where is it falling (almost never the case :-))?
Investments Tune-up
- Are you contributing appropriately for your retirement? Are you, at least, not letting any free money go so that you care getting your maximum employer 401K match? If you don't know how much you need to have saved up for retirement, you may want to get a head-start on this. Lots of tools out there; I had posted a link with a calculator that I wrote. See the post under my user name here in this sub.
- Check up on your asset allocation mix to make sure that it still matches what you are comfortable with! If the mix is out of whack because one or more asset classes shot up (or, down), think about whether/how you want to re-balance it.
- If you don't know what asset allocations are, sadly, I wish I could tell you that you can just ignore this. As we move into self-directed "401k" style retirement plans, we each must become more well-versed in asset classes and allocations. Lots of helpful links available. Basically, asset allocations divvies up your portfolio into different asset classes - US stocks, US T-bonds, International Stocks, Emerging Markets Stocks, Real estate ETFs, Gold, Cash/Cash Equivalents/CDs/T-bills, etc. The idea behind a good asset allocation mix is that you choose a mix that is balanced for risk so that as one class of investments goes down, others go up.
Skills Tune-up
- Are you where you need (or, want) to be in your job - in terms of money, position, etc.? If yes, great. If not, what concrete steps will you take to get where you need to be? These concrete steps may involve going back to school, etc. - for which you may need to budget appropriately.
- Do you have a mentor? Do you have a mentor? Do you have a mentor? Not a typo - this is super important. There is no virtue in flying solo through professional issues/questions. Have someone you respect as your mentor. How do you get one? Simply call up that person and ask.
Tax Tune-up
- Are your tax withholdings (W-4) correct? Don't pay too much in withholdings - so that you get a nice fat refund next year. Instead, best to set it up to pay a little bit on your taxes. In other words, don't let the government hold your money interest free.
Finally, a motto
A lot of us leave planning alone (whether financial or otherwise). We are afraid that if we change something we may do more harm than good. Hence, we are paralyzed by analysis or paralyzed by fear of consequences. Don't be: If you do some modicum of research before you act, have a fair mechanism to evaluate the choices you are making, small mistakes will not cost you.
Even in reasoning upon some subjects, it is a mistake to aim at an
unattainable precision. It is better to be vaguely right than exactly wrong.
— Carveth Read (Logic: Deductive and Inductive) [1898]
Submitted July 01, 2018 at 01:05PM by arnexa https://ift.tt/2lNScCY
