January Financial Review
A new year is underway. This is a time when many people pause to assess their finances. Do you have financial goals in mind? What are the most important areas to review? Here are my top ten ideas for starting the year well.
Get ready for tax season. If you haven’t already, it’s a good idea to begin thinking about what documents you will need to file your taxes. If you’re like me, some of those documents arrive in the mail. Some are digital. Now is a great time to create a convenient collection spot for each. Have a physical file folder you can quickly drop important documents into in the coming weeks. Likewise, have a digital folder to organize pdf files, spreadsheets, etc.
How is the old emergency fund looking after the holidays? Did you dip into your reserves to buy holiday gifts or fund travel? That’s ok, but come up with a plan to restore it to a level where it would support 3-6 months of living expenses in the event of an emergency. Think about how quickly you can get back to that level and how many monthly savings that pace requires.
Review subscriptions. No need to pay Apple TV $9.95 per month while you wait for Ted Lasso Season 3 if there’s nothing else you’re watching in the meantime. Another example? My wife and I were each paying an annual subscription for Amazon Prime until we realized we could combine into one household. Look at recent credit card statements and see if there are other monthly or yearly subscriptions you forgot about. There may be hundreds of dollars of annual savings on this step alone.
Anticipate big-ticket items. Next time you hop in the car, check the tread on your tires. Is this a year you’ll need to shell out for four new ones? How does your roof look? Being able to predict some of these unusual expenses ahead of time can help your budget and your peace of mind.
Bump retirement savings. If you’re not already maxing retirement contributions, commit to moving in that direction this year.
When was the last time you reviewed your estate plans? Have you had a significant life event since the last time you revised your will? Did you get married? Divorced? Have a child? Are you a recent empty nester? Retire? Inherit money? Do you have a durable power of attorney and healthcare power of attorney? Do you have logical beneficiary designations on your accounts? The importance of these documents can’t be overstated. If you answered, “I need a will?” Please make this a priority!
Take a look at life insurance policies. For all the reasons listed above, your life insurance needs change. It’s a good idea to review these policies too.
Track your net worth. It’s hard to know where you’re going if you don’t know where you’ve been. It’s a good idea to keep a spreadsheet of assets and liabilities and track that over time. Net worth is simply all the stuff you have minus everything you owe.
Tackle those passwords. The start of a new year is a great time to organize your digital life with a good password manager like LastPass or 1Password, a topic I recently covered in detail.
Make sure a trusted contact knows where to locate your important documents. Heaven forbid, should the coming year hold an unfortunate surprise for you, your loved ones will appreciate knowing where to begin the process of settling your affairs. You can save them many hours by telling them where physical documents are located (never in a bank’s lockbox!) and how to access the keys to your digital life.
Taking on just a few of these can increase your financial well-being. Do you have goals or ideas I didn’t discuss? Do you have questions about how to begin? Let’s have a conversation. Happy New Year!
