The arrival of a new year is a great time to assess your household finances and prepare for new opportunities. To help you get started, here are a few suggestions.
- Set financial goals. Financially speaking, where do you want to be a year from now? Will you start a small business, cut back spending, or look for better returns on your investments? Take time to dream; then put your goals in writing. Thoughtful planning is a first step toward prioritizing both spending and saving.
- Review your credit report. The law requires each of the three major credit bureaus to give you a free copy of your credit report every twelve months. The reports shouldn’t contain significant errors; if they do, make sure the discrepancies get resolved.
- Make or update a home inventory. Go through your house with a camera and describe what you see, along with pertinent information about your most valuable assets (purchase dates, prices, estimated values). Make an extra copy or two of the video. Keep one for yourself, put one in a safety deposit box, or send one to a friend or relative (preferably in another town) for safe keeping. Should you experience a fire or other disaster, your home inventory can be vital for getting insurance claims approved.
- Increase your savings. The start of a new year is often a time when companies offer cost-of-living adjustments (COLAs) to their employees. If your employer provides such a benefit, consider contributing a portion of the increase to your 401(k) plan or other savings account. It’s a relatively painless way to save more.
- Calculate your net worth. This is a great yardstick for measuring your household’s financial growth (or shrinkage) from year to year. Simply put, your net worth is the value of your assets (house, personal property, bank accounts, car, investments) minus your liabilities (mortgage, credit card balances, loans). Widely available financial software can help you automate this task.
- Purge old financial records. If you’re a financial packrat who keeps old cancelled checks and bank statements long past when they may be needed for an IRS audit or your own use, consider shredding them.
If you’d like additional suggestions for setting your financial house in order this coming year, give us a call.