HapiMoney

12 Steps for Getting your Finances in Order

Getting your finances in order is so easy to put off. That’s why every few months, it’s necessary to do a financial audit of yourself. Brush off those dollar cobwebs and get to work!

Everyone should take some time out of their busy schedule this upcoming weekend and complete a full financial audit. It shouldn’t take much time at all, but can help save you money.

1. Make a list of all of your assets

No, I don’t mean every last paper clip or flip-flop. But you should have a general idea for what you’re worth over time. Take a look at your bank accounts, investment accounts, 401k, as well as thing you have laying around the house. Guesstimate the value of things like your TV, computer, and other personal assets .

2. Analyze last months bank statement

Where could you start saving more money? Perhaps instead of going out every weekend, cut back and spend a night in with movies and friends.  See if you can’t save 1% more a month (assuming you spend $1000 a month, that’s just $10).

3. Check how many credit card points you have

Points don’t really do you much good just sitting there. If you have been eyeing a purchase – see if you can’t use some of those points. I, myself, had over 60,000 points recently just sitting there wasting away. A few gift cards for things I was going to buy anyways (with cash!) took away a large chunk of that.

4. Find a better bank to put your cash

Check out this list of high yield savings providers and determine if your bank is the best place to store your money.  Signing up for a new account is easy and typically only takes a short while to be approved.

5. How much below the limit are you on your 401k or Roth IRA?

Employers typically allow you to save up to $16,000 per year in your retirement account. If you don’t have an employer sponsored account, that limit is typically much less.  Analyze how much you saved last year and see if you can’t bump up your savings rate.

6. Rebalance your investments

Every portfolio should be well diversified, including assets like cash, stocks, bonds, and even real estate. Look at your investments and do a quick back of the envelope calculation.  If it looks like you are over weighted in one sector, try selling some of that asset and buying up another asset class. If you don’t know what your asset weight should be, go to HapiMoney.com and let our service tell you (for free of course).

7. Start an emergency fund

Imagine you had to live off of savings for 6 months. Now start putting that amount away into an emergency fund. This is is also the amount of cash you should keep in a high yield savings account.

8.  Write down the effective interest rate on all of your debt

Make a list of all your debt and write the interest rates next to them. If you get tax write offs for certain debt, make sure to adjust the interest rate accordingly (multiply the rate by 1 minus your tax rate).  Now order them from most expensive to least expensive. Note: Make sure to include your credit card balance as part of this debt (if you have a balance)!

9. Make an extra payment on your most expensive loan.

Debt weighs us down and prevents us from taking risks when we should. The more of your debt you can pay off now, the better. Save those low interest loans, however, for later.

10. Look for a lower interest credit card

If you’ve got a balance on your credit card, you are likely getting killed by the interest rate. If you can’t completely pay off your credit card, look for a better rate and see if you can’t transfer your balance.

11. Look into setting up a Will and Trust.

A will lets the courts know what to do with your estate when you pass away. It sucks to think about, but not having a will can be EXTREMELY costly to your family, and they might spend thousands of dollars in attorney fees fighting in court. Help your family out by letting them know your wishes, and helping to minimize any potential squabbles.

12.  Analyze your insurance coverage

Do you have rent? If so, you should get renters insurance – an incredibly cheap way to get coverage on your belongings.

What about owning a Home? Homeowners insurance is a necessity.

Own a car? If you are a safe driver, try looking into higher deductible plans.  You’ll save on the premiums by having a higher deductible.