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Your 10-point Financial Check-Up

Your 10-point Financial Check-Up To keep your car running smoothly, you need to give it an occasional tune-up. The same is true for your personal 'financial engine' - if you're going to keep it humming, you'll have to make sure all the parts are working together. That's why you should give yourself this 10-point financial check-up. By being prepared for bumps in the road, you may have much smoother journey along the way.
  1. Know what you're spending
    If you don't know how much you're actually spending each month, you're not alone. Most people don't do a good job of tracking their expenses. Why? Because it's a hassle. Nonetheless, if going to get a grip on your finances, you need to know where your money is going. Try keeping tabs on your spending for two 'typical' months, and use that information in your overall financial planning.

  2. Reduce your debt
    Look back at your two-month record to see if you can find ways to cut expenditures. Try to consolidate your debts, possibly through a tax-deductible home equity loan. If you're paying off several high-rate credit cards, get rid of them and transfer the balance to one low-rate card.

  3. Make sure you're adequately insured
    Before you begin investing for your future, you need to insure it. If you have a family, you should have a reasonable amount of life and disability insurance to replace your income should that need ever arise. And, of course, you'll need adequate car, home and health insurance, too.

  4. Set financial goals
    What are your long-term financial goals? College for your children? A comfortable retirement? If you're going to reach these objectives, you'll need to know how much money you're going to need and when you'll need it. You can then determine how much you'll need to invest and what sort of return you'll have to achieve. A financial calculator with a compound interest function can be quite helpful here.

  5. Learn the basics of investing
    Educate yourself as much as you can about the investment process. Read books, subscribe to financial periodicals, explore the Internet. Before you begin investing, talk to several financial advisors to find one whose investment philosophy meets your needs.

  6. Invest early
    Too many people delay investing because they are scared off by short-term market volatility. This procrastination can rob them of the 'miracle' of investing & the power of compounding returns. The longer an invested dollar has to grow, the greater the potential for it to become larger.

  7. Invest regularly - and don't 'bail out'
    It's almost impossible to 'time' the market & that is, to consistently 'buy low and sell high.' A much better strategy is to commit the same amount of dollars at regular intervals to those investments you believe have the best chance of long-term growth. If you can discipline yourself to ignore short-term results and think years into the future, you have a good chance of investing successfully.

  8. Diversify among investment classes
    Spread your dollars among a wide variety of investments & stocks, bonds, government securities, 'cash' instruments, etc. Different classes of investments usually move up or down at different times. By diversifying, you may greatly reduce the risk that all your financial assets will lose significant value at the same time.

  9. Check your progress
    Once you start investing, you'll need to monitor your situation regularly. Review your investment strategies with your financial advisor, and make adjustments as needed. For example, your portfolio may need to be rebalanced if a specific type of investment, such as stocks, has increased substantially in value relative to your other holdings.

  10. Help the next generation
    Through proper estate planning techniques, you may be able to reduce the tax burden on your heirs, while leaving them with resources that can help them reach their goals. And, through vehicles such as charitable remainder trusts, you can also leave a valued legacy to those institutions you value most.

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