At the beginning of the year, you have the best intentions. Taking care your money may be one of your resolutions, but life gets in the way. Before you know it, you’re heading into fall with no progress on your goals. A financial tune-up is the perfect way to tie up all the loose ends and get on track before the holidays.
“A financial tune-up helps you gain control,” says Karen Clark, Senior Vice-President and private banker with FirstBank in Nashville. She recommends doing it once or twice a year with a checklist to stay organized. These are the top nine things that should be part of every woman’s financial tune-up.
1. Make sure your savings goals are on track.
Is your spending still aligned with your goals? Your account balances are a good way to tell. Karen suggests tracking your progress in each one. This may include retirement accounts, emergency savings and education funds. She also recommends a separate account for vacations and one for the holidays. “I’m a firm believer in moving money every time you get paid — including your retirement savings,” she says. Start by setting a realistic savings goal. Then you can ask your HR department or bank to automatically deposit part of your paycheck into each account.
When your next financial tune-up rolls around, it may be easy to increase your savings — 1%-2% more may barely impact your budget and can lead to major savings over time.
2. Grade your debt payoff strategy.
When it comes to paying off debt, most would agree faster is better. This starts by taking a closer look at each of your debts, your interest rates and payoff timeline. A lot can happen over the course of a year. It’s possible your mortgage or credit card rates are no longer competitive.
Also, is your plan still realistic? Free online tools may give you an idea, but if you’re still feeling overwhelmed, review the plan with your financial planner or banker. “Staying disciplined is key,” Karen says.
3. Check all three credit reports.
Monitoring your credit is more important than ever. Karen suggests using AnnualCreditReport.com to download all three reports — Equifax, Experian and TransUnion. Federal law gives you the right to access all three once a year for free. One in five people have errors on their credit reports. These inaccuracies can lead to lower credit scores. And low scores can result in higher interest rates when you need to borrow money. Karen suggests looking for errors and reporting them directly to the credit bureau immediately.
4. Get the most from your employee benefits.
It’s normal to feel overwhelmed by all the options. But doing nothing could mean leaving hundreds or thousands in savings behind. Karen recommends meeting with your company’s HR team or benefits providers to learn more.
- Retirement plan — Does your company offer a contribution match? Start by saving enough to receive it, and increase your percentage as often as you can. The match is free money you can’t afford to miss out on.
- Health insurance — How much does your family spend on healthcare every year? A full year of expenses makes it easier to choose the right plan. High deductible plans may mean lower monthly payments. But you may not come out ahead if your family has frequent, ongoing needs.
- Flexible spending account (FSA) — These accounts let you pay for certain healthcare expenses with earnings before you are taxed. By planning ahead you can save on these expenses and reduce your taxable income. The downside is you can’t roll the leftover money from year to year.
- Disability insurance — Are you enrolled in your company’s group disability insurance plan? Group plans usually offer lower monthly payments, but the coverage may not be enough. Spend time looking at your short- and long-term disability policies with your financial planner.
- Life insurance — The same goes for life insurance. Many companies offer group plans, but that doesn’t mean the coverage amount is right. Your financial planner can analyze your family’s needs, your coverage and see if you need more.
5. Stay ahead of your tax strategy.
Most people don’t think about taxes until it’s time to file returns. Karen says this is a mistake. Minimizing your family’s tax bill should be a year-round activity. Retirement contributions, proper withholdings, deductions and charitable giving can result in major savings.
The right tax professional will communicate with you throughout the year. They will share relevant news and offer ongoing check-ups. This year’s tax overhaul may affect how much your family owes. Take a few minutes to double-check your family’s withholdings are still correct.
6. Invest in your college savings strategy.
States like Tennessee have launched programs to make college more affordable. But no one can predict the future of tuition prices or where your children will want to go. That’s why Karen recommends starting early. “A 529 plan is an excellent way to save for your kids’ education,” she points out. Many states offer tax deductions or credits, and your money grows tax free. Earnings can be withdrawn tax- and penalty-free when used for qualified education expenses. Thanks to recent tax law changes, this now includes a limited amount for elementary and high school too.
7. Review your family’s estate planning documents.
Talking about wills and trusts isn’t exactly popular around the dinner table. Maybe that’s why so few families have a plan. A recent survey from Caring.com found less than half of adults have done any estate planning. If this sounds like you, it’s time to meet with a local estate planning attorney. Documents like wills, financial power of attorney, healthcare power of attorney and a living will are too important to do it yourself online. Once your plan is in place, you should check your beneficiaries are correct on an annual basis. “One of the biggest mistakes clients make is not updating beneficiaries. This is critical after major life events like a divorce or having a baby,” says Karen.
8. Develop a cyber security plan.
It’s hard to avoid the endless news about online security breaches. You may feel like hiding under a rock, but staying vigilant is the safest approach. Spend time securing your wireless networks, computers, tablets and cell phones. It’s also important to update online logins often, too. “Use a password manager to store your passwords and update them on a regular basis,” Karen adds.
9. Know when it’s time to work with a finance planner.
Managing your family’s money is a big deal, and it’s a lot to tackle on your own. If studying tax law or investing sounds like too much, consider working with a professional. Chances are your friends or family can recommend someone they love working with. Karen says referrals from your network are the best place to start. “Interviewing more than one person can help you find the right match. Trust is everything when it comes to meeting your family’s financial goals,” she says.
It’s difficult to juggle the non-stop demands of family and career. If your financial priorities have taken a backseat, there’s no need to feel ashamed. This tune-up is your first step to a strong financial future, and it’s never too late to begin.
To learn more about the financial planning services offered by FirstBank, visit firstbankonline.com.
This article is sponsored by FirstBank.