With spring in the air, now is the perfect time to organize your finances. To help you get your financial house in order, we looked at what the National CPA Financial Literacy Commission in America recommends to properly examine.
The National CPA Financial Literacy Commission is part of the American Institute of Certified Accountants whose role is to develop educational materials and grade the Uniform CPA Examination. They also monitor and enforce compliance amongst accountants in the profession. As part of the AICPA, all they simply do is to provide financial literacy to individuals.
So in this article, you are going to learn about the basic criteria and areas of importance when you need to keep your financial house in order. Keep reading.
1# Make Sure Your Budget Is In Shape
The first step to this is to re-examine your budget and rule out some extra costs. Take stocks of assets and liabilities, your incomes, and your expenditure. You might also want to check for subscriptions you are not using.
At this point, it is also important to check your mortgage loans if you took out any. The rate at which you currently have a mortgage can be compared to the rates available now to determine whether you would be better off refinancing.
Generally, create a budget to manage your finances. You should map your expenses versus your income and make appropriate adjustments to them.
2# Plan Out Your Goals And Get To Work
Deciding to save more is great, however, to achieve this, it is easier to differentiate your long-term goals from your short-term goals. Differentiating it this way helps you to focus more on what’s more important to make your finances grow.
Although, improving your finances is a long-term commitment. So the first step is to lay down some spending rules and financial goals you would like to achieve. It doesn’t end there, however, the next step is to meticulously follow up on these goals and make sure you put in the work.
At every point, you should be able to confirm if you are on track for each of your goals. Debts incurred should also be paid up.
You might also need to set up an emergency savings account. This will protect you from unforeseen expenses and/or losses of income. Saving even a modest amount will help you develop financial stability.
3# Review Your Investments
This is the part where you check on how your investments are doing. Are they in line with your financial goals and your risk management needs?
Due to market fluctuations, there may be some changes in the value of the stocks, bonds, and other holdings you own over the past year, causing the relative weighting of your holdings to change from what is most suitable for you.
Is it a time to rebalance? Do so by assessing your portfolio and making sure that your investments are aligned to help keep you on the right course.
4# Review Your Retirement Plan
Make sure you are contributing enough to your work 401k plan to receive the maximum employer match, or you will be losing money. The 401k plan is a retirement savings plan offered by American employers that allows a portion of an employee’s wages to be sent to an individual account (a retirement account).
In addition to your employer sponsored plan you might also invest in a Roth IRA. (if you are under the income limits) Roth IRA’s grow income tax free and are a useful tool in retirement.
However, you should discuss this with your tax advisor and financial advisor first to see if it is something that would be beneficial to you.
5# Review Your Insurance Coverage
Take a look at your insurance coverage’s for life, auto, disability, home, liability, etc. You can also have your financial adviser explain them to you and guide you through to make sure you are not overpaying on any of them.
Consider dropping some of your deductibles to save money, or if your policy has any unnecessary extras that are adding up and increasing the amount you have to pay on coverage.
To see if switching is worthwhile, you should also try comparing insurance quotes from different providers. Sometimes they reduce their rates to gain more customers.
The Bottom Line
These are a few ways you can keep your financial house in order. It’s pretty straightforward but if you ever need extra help from a professional financial adviser, not to worry.
At the Art of Financial planning, we have the very best of professionals that would take you by the hand and guide you to make the best decisions for your finances. Contact us now, let’s get you started.
