How have you fared in 2013? The end of year is always a good time to take stock and look back at what for many has been a challenging year financially and otherwise, and to prepare yourself for 2014. Here are a few things to consider before the end of the year to ensure that your financial life is on track for the new-year.
Did you start a new job or leave a job? Did you get married this year? Did you start a family or have a new baby? Did you retire? Did you get divorced or widowed? Whether there have been notable changes in your personal or professional life, or even if it has been relatively uneventful, your personal finances need periodic attention. I recommend a complete review or analysis at least once a year to get a clear view of your current financial situation.
Do you know where your important documents are? Are they up to date? All your difficult to replace legal and financial documents should be stored in a safe and secure place. These include your will, trusts, power of attorney, title documents for your assets such as your property, cars and so on. Birth, marriage and death certificates, international passports, lists of personal possessions should all be kept securely.
Take a good look at your spending over the past year? Do you have any idea what you spent and on what? Is there any excess that you can cut back on? How much did you save or invest this year? Ideally you should have an emergency fund of at least three to six months of your monthly expenses saved in cash or in the money market. Cash from your thirteenth month salary or an end of year bonus if you are lucky enough to get one, could kick-start this financial cushion if you don’t already have one.
Most financial advisors suggest that you should save between 10% and 15% or more of your income. Have you built an emergency fund this year? The easiest way to start to grow your savings is to automate it by putting a direct debit in place so that you won’t be tempted to spend all your income but rather it can be directed to an appropriate savings vehicle. Most mutual fund companies make it easy for you to be able to automate your savings and investment plan.
Have you managed to reduce your debt in 2013? Do you now carry less debt today than you did on 1st January 2013? Until you face up to your debt it will continue to grow. Which loans charge you the highest interest rate? Start to tackle those first. Don’t ignore your debt or wish it away; if it becomes a burden, it Is worth approaching your lender to discuss the possibilities for restructuring your debt to make it more manageable.
Did you make any investments this year? What is the return on your stock, bond, or mutual fund investments? Are you satisfied with their performance or is it time to make some changes? At least once a year re-visit your investment portfolio to make sure that you are not becoming too heavily weighted in a particular asset class. A diversified portfolio that consists of some cash, stocks, bonds, and property will help to spread your risk. Adjust your portfolio to ensure that your asset allocation is appropriate to your short, medium and long term needs.
Your age, family situation, health, and goals will influence the level of risk you can tolerate and the level of insurance you take on. Are you well protected if something untoward happens in the coming year? It is worth looking over all your insurance cover including health, life insurance, homeowners insurance, vehicle insurance, and renters insurance, to determine what changes might be required for the coming year.
Do you have a will or trust or some other estate planning vehicle in place that could ensure that your loved ones are protected in the event of your incapacity or demise. If you do, when last did you review it? Does your will still fairly reflect your personal wishes for the distribution of your assets? Have your personal or financial circumstances or your beneficiaries significantly changed over the past year? Maybe you have had children or grandchildren since you wrote your last will. Keep your will up to date and make sure that other people know where it is.
Rather like an annual medical check-up helps you to be proactive about identifying potential problems before they fester and become real problems, an annual review of your finances should throw up areas of concern so that you can begin to pay some attention to these before they seriously jeopardise your financial security.
No matter how busy you are; take just a few hours out of this holiday period to focus on your finances. It is important and you will feel more in control of your financial life as you head into 2014.
Written by Mrs Nimi Akinkugbe, Lagosmums’ money management and financial specialist. For further questions or advise send email to [email protected].