With a new year underway, it’s a great time to sit down and perform a self-evaluation of your personal financial position. Like going to the doctor, a personal financial audit is something many people put off until they have to do it, and sometimes, that’s too late. Luckily checking the pulse of your financial health and doing what you need to do to get back on track, isn’t hard.
Here’s a quick list of things to ask yourself:
- What’s your “risk tolerance”? Your answer depends on how much you’re willing to stomach in a volatile market? Are you “high-risk” or low risk”? The remedy: re-balance your portfolio to adjust to your comfort level. If you’re near retirement and feel that you’re too heavily weighted in high-risk equities, move a portion to a fixed income. That will eliminate some of the big swings in your portfolio’s ups and downs.
- How much debt do you have? Don’t stress if you have a little, but how much you carry is relative to your current income and prospective income. Not to mention that even having a little now and ignoring it or not managing it properly, can mean that in short order, it can creep up on you and grow. Learning your credit history is critical to getting back on track. The remedy: first, pay off those high-interest credit cards, and then develop a realistic debt elimination strategy for the rest.
- Do you have an “emergency fund”? Financial emergencies come up, and usually at the worst time. According to a survey by “bankrate.com,” 63 percent of Americans don’t have enough saved to cover even a $500 financial setback. Bottom line: you need an emergency fund, usually at least 6 months of expenses. If you don’t have one, make this a priority. The remedy: start at a pace you can afford: just $5 a day adds up to $2,000 in just one year.
- What’s your retirement plan? Whether you’ve been regularly putting something away for retirement or just starting, see where you are and whether it will be enough. The remedy: people usually “pay themselves last,” so it’s time to start setting a portion of your income for yourself and your retirement. Best way to do it? Have someone else do it for you, like your employer. If your employer offers this benefit, use it. Fund your 401(k), but only up to your employer’s match, and also look at a Roth IRA, which doesn’t tax capital gains.
Go and take a hard look into that mirror, and if you need some help, don’t hesitate to call the professional at The Credit Repairmen to get you back on track!