#1: Check Your Credit Score
Your credit score is more important than ever.
In the wake of the financial meltdown, credit is much harder to come by, especially if you don’t have a good history. If you are fortunate enough to obtain a credit card or loan, you’ll pay higher interest rates if you have any prior problems. Here’s your first step: Order your free annual credit report to check on your current score and see if there are any problems. It’s easy to do. Just go to www.annualcreditreport.com or call 877-322-8228. (Here’s a tip: To get a credit report every four months, rotate among all three credit agencies, getting one per year from each.)
#2: Check Your Savings
We recommend you have at least three to six months of living expense tucked away. We understand that there are lots of calls on your money these days, but if there’s one thing we’ve been reminded of during this economic crisis, it's that nothing is more important than having an emergency fund.
If your savings aren’t quite what they should be, get started. The first step is always the hardest.
Make savings easy by paying yourself first every month. You can deposit the money in your savings account yourself or set up automatic deductions from your paycheck.
#3: Check Your Investments
When you go to the doctor for a checkup, certain things are more painful than others. After the stock market free-fall we endured — one of the toughest ever — this investing checkup will hurt a little bit … OK, maybe a lot … but you must do it!
When was the last time that you checked your brokerage statement? Check your statement now.
This is the perfect time to review your investments, consider selling losers and taking the tax loss, and revisit your investment goals for the next 12 months.
#4: Get Organized
Having your finances properly organized is one of the most overlooked and underrated keys to getting the most from your money.
Do you have any idea how much money you’re spending on specific items during the year? If not, you should. We guarantee that there will be some surprises in there that will make you want to change a few things.
#5: Check Your Insurance
This is a biggie and covers many different areas, so here are the highlights of what you want to check:
Homeowners: Is your home insured for at least 80% of its replacement cost? Do you have “replacement cost” riders on the contents of your home?
Auto: Do you have at least $300,000 of auto liability insurance?
Disability: Do you have a disability insurance policy to replace lost wages should something unexpected prevent you from working?
Life insurance: Do you have adequate coverage to protect your family? As a general rule of thumb, eight to 10 times the annual income of the major breadwinner in life insurance coverage is the minimum amount necessary so that your family may maintain their current standard of living when you are no longer around.
Long-term care: These policies are really worth looking into to protect your assets in the event of catastrophic illness and/or nursing home expenses.
#6: Check Your Retirement
Most people’s biggest retirement fear is that they may outlive their assets. That fear has only deepened in light of the stock market debacle.
If your employer offers a 401(k) or other type of retirement plan and offers to match some or all of your contributions, take full advantage! This is one of the easiest and best ways to build your wealth for retirement. The key to a successful retirement is knowing whether your current portfolio strategy and investments will provide the income that you’ll need after you retire. To determine that, you must first figure out how much income you’ll need.
#7: Check Your Tax Planning
We’re law abiding citizens, so we believe that you should pay every penny of tax that you owe, but, frankly, not a penny more. Smart tax planning — both at tax time and throughout the year — can save you hundreds if not thousands of dollars.
Taxes are complicated (there’s an understatement), so we recommend that you talk with a professional. But rather than have your tax pro simply prepare your taxes every April, sit down with him to create tax-planning strategies to be sure you’re paying only what you owe.
#8: Check Your Estate Planning
How’s this for a shocking statistic? More than one-third of Americans do not have a will.
If you’re in that group, get one ASAP or your state will get to decide how your hard-earned assets are distributed when you pass away.
If you do have a will and have had any major life changes in the past year, such as a death in the family, divorce, birth of a child, grandchild, inheritance, major sickness, etc., then it’s time to update your will.
Even if you haven’t experienced a major life change, it’s a good idea to review your will every few years to be sure your beneficiary designations on insurance and retirement accounts accurately reflect your current wishes.
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