It’s a new year (believe it or not), and reviewing your financial status is important. Below are a few tips.
- Review Your Assets and Liabilities. This is the right time to review and update your asset and liability statement. If you don’t already have an asset and liability statement, create one. If you are in a marriage or relationship and you are sharing finances, then do this with your spouse/partner and get all information on one document. If an emergency comes up or your spouse or partner is incapacitated, or dies, the information will be easily accessible.
- Check Your Credit Cards. Review credit cards to see if you have forgotten about any unnecessary automatic monthly payments. When I did this recently, I found several monthly payments for services I was no longer using. Go over your year-end statements and assess whether your credit card spending is reflective of how you want to be spending your money. And, most importantly, make sure your credit card charges are yours and not someone else’s.
- Manage Your Debt. Develop a plan to pay off debt, especially high interest debt. Be methodical. You can’t turn your finances around in a day. It’s like exercising it takes time and effort (and sacrifice) to build up. However, you can make significant progress over time if you stick with your plan. Also think about moving debt from higher interest to lower interest so your payments make greater impact.
- Update Insurance Policies. Review and make sure that your insurance policies for life, auto and home are properly calibrated. As we get older the cost for life insurance becomes very expensive and may simply not be a good use of money that you could otherwise be investing. Insurance needs to be managed and reviewed regularly. Also, don’t forget about long term care insurance which is very critical to any long-term financial plan.
- Pay Attention to Your Taxes. Make sure your taxes have been filed for all previous years. If you have been filing (or think you have been) joint tax returns, ask your spouse (or your accountant) about the status of your taxes if you don’t know. You can also check the status of your tax filings on the IRS website. This has been a recurring theme in divorce cases that I have handled — unpaid taxes with devastating penalties and interest accruing. Don’t be caught holding the bag. If you sign a joint return, make sure you read it and ask questions before it is filed. Although there are some rare exceptions under law (e.g., innocent spouse etc.), when you sign a tax return with your spouse, you are jointly and individually responsible for any tax liability.
- Get Smart. Finally, if you are in a relationship with someone who is secretive about money then it is up to you to ask questions. You do not want to be in a situation if something goes sideways in the relationship, as it so often does (e.g. divorce, death or disability), you are caught by surprise. It is up to you to know where you stand financially and to make smart decisions. I can’t tell you how many times a spouse/partner has been shocked to hear that he/she does not have financial security as they thought they did. As difficult as the conversation may be, it is always better to communicate with your spouse/partner about your financial concerns. If you are concerned that your spouse/partner is not responsible with money, have a conversation – perhaps with a neutral financial planner – and figure out a way you can both get some piece of mind and to have some separate money to do as you wish.
Taking stock of your financial well-being is vitally important just like taking care of your physical and emotional wellness. Don’t ignore it!