The 2018 Personal Finance Roadmap

a depiction of a personal financial roadmap to lead the investor to success

The 2018 Personal Finance Roadmap

By Mike Desepoli, Heritage

Ah Spring time. Warm weather and longer days.

People also tend to be more motivated in the Spring to organize, clean, and go through their stuff.

While it’s always good to get rid of old stuff and clean your house or apartment, I think it’s also a perfect time to leverage your motivation to give your personal finances a good deep cleaning as well.

Regularly checking up on your finances is important. There are many things you can do to improve your personal finances. However, a majority of them are really easy to put on the back-burner. Trust me – “buy life insurance” was on my to do list for two years before I finally got around to it.

Carve out some time this Spring to go through this spring cleaning personal finance checklist. It will help you start doing some things you’ve been meaning to do, as well as give you a check-up on certain things you are already doing to ensure you are still in a good spot.

Check your Net Worth

Checking your net worth can be a painful experience, especially for those who are in student loan or other debt. Even if you fall in this group, though, it’s still better to know where you stand than to be ignorant of your situation.

I have said in the past that for a large majority of people, especially millennials, it’s more important to focus on income than net worth. That’s exactly why it took me so long to get around to utilizing online platforms to track my finances. But once I did it felt good to know exactly where I stand at any point in time.

Review your Budget or Start Budgeting

One of the things I stress in personal finance lunch and learns or coaching sessions is to not only budget, but to regularly review your budget.
If you haven’t started a budget yet, that’s the first thing you should do. Budgeting can be as hands-on or hands-off as you want. Some people hold themselves to a specific spending threshold while others (myself included) just track the monthly trend and make sure they aren’t spending too much on things they don’t care about.

If you already budget, take some time to review your monthly spending. Ask yourself these questions:

• Is my spending in alignment with my values?
• Are there areas I can cut back spending on (i.e. restaurants, cable, cell phone, entertainment)?
• Is my current spending habits allowing me to pay down debt or prohibiting me from paying down or incurring more debt?
• What changes can I make to create more cash flow?

Review your Debt

While Personal Capital does a good job of pulling in your debt, I think it can be valuable to lay out all your debt in a spreadsheet as well.
When I’m looking at my debt I focus on a couple things: what type of debt it is and what the interest rate is?

There are different strategies you can use depending on the type of debt, but the first goal should always be to get a lower interest rate. If you have high interest credit card debt it can make a lot of sense to refinance it through a personal loan. It it’s student loan debt there is also opportunities to refinance at a lower rate.

Debt can be overwhelming, and I always encourage people to be action-oriented with their debt. Sometimes no action is needed, for example if you have it on auto-payment and it will be done at a specific date in the future (assuming you are happy with the interest rate). Others may want to be more proactive, such as refinancing, increasing their income through their 9-5 or a side hustle, or cutting expenses to pay it off faster.
Analyze your Income

It’s easy to get comfortable in a job and lose a pulse on whether or not you are getting paid fairly. Take some time to review your 9-5 income and give your resume a refresh. Some specific things you can do include:

• Review and compare salary data on sites like glassdoor
• Review job listings on an app like indeed to see what sort of skills employers are looking for
• Update your LinkedIn Profile
• Update Your Resume

Perhaps you are happy with where you are at with your 9-5 and the prospect of switching employers – even if it meant a higher pay – isn’t attractive. Or perhaps you are already maxed out at your 9-5 but still want to increase your income.

Check your Emergency Fund

Now you probably don’t need to check your emergency fund. If you have one, you likely know how much it is. If you don’t have one, you also know how much you have.

But when I say check your emergency fund I want you to actually think about whether or not your emergency fund is sufficient. How many months could you live off of it? If your answer was less than three months, it’s time to make building your emergency fund a priority. If you really want to challenge yourself make a plan of hitting somewhere in the six to twelve month range.

Now, if you don’t have an emergency fund then it’s time to get one. I will be the first to admit that building an emergency fund is not easy, especially when you have debt and other things that you want to put your income towards. But I can also tell you that it’s one of the best things you can do for your peace of mind.

Start by setting a realistic goal like saving $100. Then challenge yourself to increase that to $500, and so on. Eventually you will want to have the equivalent of three or more months of monthly expenses set aside. The important thing is to get started.

Review your Retirement & Health Savings Account

Another thing you should review is your retirement and Health Savings Account. A few things to check are:

• Are you contributing up to your company match for your 401k?
• Whether you have a company match or not, how much money are you actually putting into your 401k and/or IRA?
Are you able to contribute more?
• What investments do you haven in your 401k and/or IRA? Do you need to re-balance it?

I’m all about the “set it and forget it” approach to investing, especially when it comes to retirement accounts, but it is important to check up on them every once in a while, even if it’s just once a year.

Review your Insurance

The last thing on the Spring Cleaning Personal Finance Checklist is review your insurance. Insurance isn’t the most exciting thing in the world, but it serves an important function and can protect you from expensive, unexpected bills – or even bankruptcy.

Take an inventory of your current insurance coverage. How much do you pay in premiums? What are you actually getting in return? Is your coverage adequate?

Many times people don’t realize how much they are paying for insurance because it’s baked into their paycheck, mortgage payment, or is on auto-pay. Understanding the true cost of your insurance is important, if not just to have it as a reference point.

Insurance isn’t all about cost. You can oftentimes get cheaper insurance, but if the coverage is bare-bones you are going to regret it if something big happens. One of my former manager’s house burnt down right after he switched to a cheaper home insurance company. They ended up being very difficult to deal with and caused much more hassle than a different company likely would have. That’s not always the case, but I think it’s important to balance cost with quality of coverage.

Besides reviewing your current coverage it might make sense to add some additional coverage as well. Up until a little over a year ago I did not have any life insurance, but I decided to open a million dollar policy at age 27. There’s are many reasons to consider life insurance. In general, if others depend on your income and would be impacted if it were to go away, you should look into getting life insurance.

For more info on this topic checkout: (VIDEO) #AskTheAdvisor 55: The 2018 Personal Finance Roadmap

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