Personal Financial Plan - First Quarter

Managing your personal finances is an ongoing process that requires commitment and discipline. Most people are successful at making sure the bills get paid and often saving a little on a regular basis.  However, managing your finances effectively is more than just handling the daily or monthly tasks.  Below is a plan outline for January through March that can serve as a guide to addressing some of these other important issues.  The suggestions on this outline may not match your personal financial timeline, but they can serve as a reminder to make sure you address these key considerations when it’s right for you. 

January: Plan, Review & Prepare

Establish your financial goals for the year and create a plan to accomplish them

• If your goal is to save on a regular basis, establish an automatic savings plan to have a certain amount transferred from your checking account to your savings account each month.  You can use this strategy for long term goals like retirement or saving for a down payment on a new home and short term goals like having money for vacations or major purposes.
• If your goal is to pay down debt, identify concrete steps you can take.  Writing the steps down will provide a sense of priority and make it more likely that you will actually take those steps.

Review your investments to ensure your asset allocation matches your time horizon and risk tolerance

• Equity, fixed income, and cash investments have different risks and offer the potential for different returns.
• Stocks and stock mutual funds have historically provided higher returns, but with more volatility and greater risks of losing money than the other categories.
• Cash investments in insured accounts can provide safety of principal, but offer lower returns.
• Fixed income investments, such as bonds or bond mutual funds, have historically fallen in the middle.
• How you divide your assets into these categories should be based on your time horizon and your risk tolerance.  Longer time horizons and greater risk tolerances usually point toward a greater weighting of equities with hopes of higher returns over time.
• Remember…past performance is not a guarantee of future performance and you want to be sure to consult your investment or financial advisor to help make sure your asset allocation is appropriate for you. 

Prepare a personal balance sheet

• Taking control of your financial future is a process; and, as with any process, it is important to monitor your progress. 
• Be sure to include all your assets, such as bank and investment accounts, retirement plans, IRAs, real estate, personal property and business assets.
• Liabilities should include mortgages, credit card balances and any other loans you may have.
• Preparing a personal balance sheet each year will enable you to not only better understand what you have but also how your assets and liabilities may be changing. 

February: Taxes & Organization

Get organized for filing your tax return

• Employers usually provide W-2 forms in late January.  1099 forms from banks, credit unions, brokerage firms and mutual funds usually arrive by early February.
• Gather other information such as charitable contribution receipts, tax receipts and documents you may need.
• If you prepare your own tax returns with software, the current version is probably available.  Be sure to check for updates once you buy the program and before you prepare your return.

Be sure your financial information is organized

• There can be a lot of paperwork with your finances.  Having an organized system can save time and reduce the stress of not being able to find something when you need it.
• Tax information should be kept for three years from the due date of the tax return where the information is reported.  After the three year period, most supporting information can be thrown out.  However, you may want to consider keeping copies of your actual tax returns for a minimum of 7-10 years or longer.
• Many other documents should only be kept as long as they are needed.  Insurance policies should be kept as long as the policy is in effect or until a claim can no longer be filed.  Loan documents can be tossed after the loan is paid off.  Deeds and real estate information should be kept for as long as you own the property.
• Many people use file folders in a drawer or storage bin to keep financial papers.
• Consider using a Family Records Almanac to record and store important financial and family records and information. 

March: Insurance & Inventory

Review your insurance policies

• Be sure to have the coverage you need for your home, belongings and car.
• Review your health insurance to make sure you understand the provisions of your policy.
• Review the deductibles on all your insurance policies.  You may be able to reduce your premiums by accepting higher deductibles.
• Consider an umbrella liability insurance policy.  They can provide additional coverage above what is included with your home and auto policies.  Usually, umbrella policies are relative inexpensive.

Create or update an inventory of your belongings

• This information can be essential if you ever have to make an insurance claim
• If you have a video inventory, be sure to store a copy in a secure location away from your home.
• Update your inventory on a regular basis.  Updating annually may be sufficient unless you acquire more or more expensive things.