Ok, you have organized the closets, sorted through family photos and put away the holiday decorations. Now what?
Get smart and organized about your finances – here are ten tips:
- Update and/or create your asset and liabilities statement. This requires listing everything you own – retirement and investment accounts, any interest is a business, real property – your home or a rental, a collection of coins, really anything of value. Put it down. Also record any debt — like a mortgage, connected with an asset, so you can calculate equity (pretax);
- Review all year-end statements and attach them to your updated or newly created asset and liabilities statement. This may include year-end E*Trade statements, or your Vanguard retirement statements, or your year-end statement for your home mortgage. Having these statements in one place and organized will make life so much easier especially if you are planning on making any financial purchases or taking out a loan in the upcoming year when you will need to supply information to a bank.
- Review debts (including high-interest debts like credit cards) and focus on what you can pay down in the upcoming year. Put together a financial statement of your income and expenses so you know where you money is going – this is a great tool in helping you manage your spending, restrain over-spending and avoid running up credit cards that have high interest rates.
- Retire or transfer higher interest debts first, if possible. If your debts are out of control, you need to discuss how to manage with a financial advisor or an attorney who can outline your legal options – including negotiating with the credit card companies, either on the amount or payment plan. Considering and or filing for bankruptcy may be an option but it has very significant legal ramifications, so this is something that you need to discuss with an expert and proceed cautiously. Make sure all debts even those not connected to an asset are recorded on your asset and liabilities statement.
- If you own a home, is it time to consider refinancing since interest rates are climbing again? What are the pros and cons to refinancing, and is this in your best financial interest? If you are considering buying a home, is this the right time to do so? Do you have all the financial information you need to apply for a mortgage or money for a down payment? Be ready if that opportunity comes your way.
- If you are married (or in a relationship where your finances are intertwined), are you talking about finances and goals? Are you sharing information with your partner/spouse and if not, why not? Do you need to speak with a counselor who may be able to facilitate this kind of discussion and exchange of ideas and feelings? You have heard the term financial infidelity, it is real, and is a major reason why people break-up. Everyone’s relationship with money is different and can create a very toxic dynamic between people who otherwise have so much in common. It is important to identify issues around money and to have discussions about them. It may require a third person like a counselor to help unwind the barriers that have been erected overtime.
- If your spouse or partner does not want to share financial information, ask them why. It could be a sign that they are hiding something from you that could show up and cause difficulties in the future.
- If you have filed your taxes jointly and desire to continue to do so, make sure your tax filings are up-to-date and have in fact been filed. I have had situations where one spouse took responsibility for the filings but mislead the other spouse by never filing and criminal charges were filed against them.
- If you are a financially dependent spouse/partner and have stepped back from work to take care of family or for other reasons, make sure you understand your financial status and that you have the ability to access accounts and funds in case of emergency. Your contributions to the family are just as worthy as the spouse who earns the income, but that too needs to be openly discussed or the power dynamic of the relationship can quickly deteriorate.
- Getting to financial transparency. This can be difficult at first, but in the longer run it will improve your relationship or at least position you in a way where you will not be caught off guard or in a situation that leaves you financially vulnerable and unprotected.
Make 2022 a year in which your finances are organized, and your knowledge matches your worth. May 2022 be a healthy, happy and financially successful year!