1. Have money and credit in your own name.
Keeping your own financial identity is key to getting credit when you need or want it, and to maintaining your independence. Establishing and maintaining your own savings account can provide peace of mind as well.
2. Discuss finances with your family.
Too often, money is considered a “taboo” topic, but uncertainty, fear and conflict arise when finances are not discussed. Knowing how much you have, how much you owe, where you spend your money, what you are saving it for, when you may need it, which items are most important and why they are important can help to demystify finances and keep you on track.
3. Know your credit score and maintain a good rating.
There are three major credit bureaus –Transunion, Equifax and Experian — and, at your request, each will provide you with a free report on an annual basis. Paying bills on time and using credit that offers perks and low interest rates help your scores. Similarly, this report can identify if there are any errors, fraud or identity theft perpetrated on you.
4. Build and manage your own plan AND integrate it with other family plans.
Studies show that those with a plan are more likely to follow it and succeed. Documented plans remove emotion from your decisions, enabling you to act upon your plans more effectively. Similarly, sharing your plan with others ensures you don’t have conflicting or overlapping plans or goals that impact your ability to succeed. Finally, sharing your plans helps to ensure you keep your goals in mind and your focus on achieving those goals.
5. Build and manage a budget.
Knowing where you plan to spend your money, and learning about where you actually spend your money, can help you identify additional requirements to plan for and/or areas to eliminate. Ensure that saving is a component of your budget, too. Additionally, while charitable donations are wonderful, make sure you are able to afford your required expenses first.
6. Understand and manage your debt.
Debt is NOT a bad thing, but you should know what you owe and how it fits into your budget so you are not uncomfortable or overly worried. It’s fine to use credit cards as they provide an excellent record of your expenses for your budgeting and spend analysis.Credit card bills should be paid in full monthly as the cost of carrying balances can be expensive if your credit cards have high interest rates.
7. Keep your estate plan current.
There are several estate documents in addition to a will that you should create and keep current. These include but are not limited to: power of attorney (can be separate for finances and for health care decisions); living will, also known as an advanced medical directive; inventory of your assets and liabilities; beneficiary forms for your assets such as insurance, 401(k)s, and IRAs; contacts for others to continue your wishes; passwords for everything including email, social media, bank accounts, credit cards, your advisors (financial advisors, attorneys, bankers, accountants) and vendors (lawn care, pest control, utility providers); funeral arrangements / desires; and, if applicable, trusts as well. While these do not need to be updated every year, an annual update will make the tasks easier.
8. Review your insurance requirements regularly.
Health insurance has become a larger expense, and with lifespans lengthening and healthcare reform continuing, costs and options continue to change. As you progress through your own stages of life, your needs change, too. Additionally, consideration of long-term care, disability protection and life insurance all should be considered for your specific circumstances.
9. Plan for future needs.
Review Social Security and your retirement interests periodically. Also, consider your ability to take care of yourself and others, as well as others’ ability to care for you as you age. Determining where you will stay is key as well – will you stay in your own city/ home, move closer to loved ones, or find a location catering to others in a similar stage of life? Long-term and geriatric care are considerations that should be planned for today.
10. Set short-term, medium-term and long-term financial goals.
As part of your plan, be careful not to be too short-term or long-term focused at the expense of another. For instance, raising children and planning for education can span many years and may need different prioritization at different times. However, while those goals are important, sacrificing retirement to fund your children may leave your long-term plans more vulnerable.
11. BONUS –
Find an advisor who you trust, enjoy, and has your best interests as their first priority. There are many fine advisors in the industry, and finding one you like can help you build, modify as appropriate, and stick to your plan so you have more confidence about attaining and maintaining your financial goals and standard of living.
Jeff Kort, MBA, Munn & Morris Financial Advisors, Dallas, TX, can be reached at [email protected] or (972) 692-0909