Personal Financial Review
Let me start off by explaining the purpose of this post. Many of you are currently quarantined or spending countless hours inside your home due to the Coronavirus. Most of you are in the position where you are still employed but working from home and adjusting to a virtual work style. That is the group I am writing this for. I understand there is another group of people that are not working or may have significantly reduced hours and are wondering how they will pay the bills. I plan on creating a post for that group as well, but I am delaying it in hopes that we get some guidance from the Federal government on the stimulus plans.
We all hate being forced to stay home. Many of us normally love staying home to avoid large crowds of loud people. Now that we are being told to avoid large crowds of loud people, it’s all we crave. If you haven’t found things to do around the house that you have been putting off for months, I have a solution! Here are some things you can do to organize your finances while you are sitting and watching your favorite Netflix show for the tenth time.
Make a list of all your accounts – This is always the first step with my clients. Make a list of all your financial accounts: bank accounts, debt, retirement accounts, credit cards, student loans, mortgage, etc. This will give you the entire picture of your financial life. You can now see everything you own and everything you owe. This is your starting point.
Consolidate accounts – Look through your list of accounts. Do you have three 401(k)’s from old jobs? Is there an old savings account that your mom is still on from when you were in high school? Having more accounts makes everything harder to track. Simplify everything as much as you can. Your old employer retirement plans can be rolled into your current employer’s plan or an IRA. Five different store credit cards aren’t probably necessary anymore since four of them were opened to save 20% on some big purchases back in college. You may need some help transferring investment accounts because they tend to be more complicated and you don’t want to cause any tax issues but see what can be consolidated to make your life easier.
Review your bank statements – This is always a “fun” exercise. Download the last three statements you have from your main spending account. This could be your checking account or a credit card. The goal of this exercise is to review your spending to see what may be unnecessary. Do you need four streaming services as well as cable? Are you aware of how much it costs to feed a family of four each week? How did $500 worth of goods from Target disappear in three months? The goal of this is to open your eyes to areas where you could make minor changes but save quite a lot of money over time.
Review your bills – When was the last time you opened your phone bill? Most people auto-pay their utilities and never look at the actual bills. Do you realize that those teaser rates from your internet provider are long gone? Take some time to review your cable, internet, phone, trash, electric, gas, and insurance bills. Don’t pay for things you don’t need. Call your providers and see if there are discounts you may qualify for and shop around to see what other options you have.
Make a budget – Yes, we are getting into weeks three and four of the quarantine now. Nobody, except nerds like me, enjoy making a budget. Just give it a shot. See how much is coming in and how much is going out. Use your last three months of statements to start. You can even use one of the many free budgeting apps available. Push yourself to save more and spend less this year. The exercise of making a budget will help you realize what areas you need to focus on in terms of spending and saving. This doesn’t have to be strict rules on how much you can spend. It’s for you to truly think about where to use your hard-earned money.
Find ways to help your community – This last step should probably be the first activity for this group. Once again, this post is focused on those of you who have stable jobs and are not losing income during this time. Every community in our country is struggling right now to figure out how to get through this uncertainty. If you went through every step listed above, you should have been able to find some savings and work on a plan to save even more money going forward. Now, I am asking you to put that plan on pause for a month and use those savings to help others in your community. Find the Facebook pages of your local shops and restaurants. They are adapting every day so that they can stay open and continue to pay their employees. Non-profits may be providing services to a larger group of those in need. Anything helps!
When Tria and I moved to Carthage, I worked from home for over two years. It is a lot easier to be home that much when you have a purpose every day. Everything I listed out in this post can be done in front of the TV so it won’t be too boring. Most of you have probably contemplated doing these things for a few years, but never had the time.
If your biggest complaint this week is being bored at home for who knows how long, hopefully this helped. Most of us take for granted jobs that we can take with us wherever we go. We are the group that will determine whether local businesses will succeed. Not everyone can eat out for lunch and dinner, or even make their usual weekly grocery run because they may not be getting paid this month. Use this post to get your financial life organized so that you can support your community. Once this all passes, you will be ready to tackle all your financial goals.
Ready to do some more with your finances? Read through “Getting Your Finances Organized” Part 1 and Part 2 on my blog.
Mike Zeiter, CPA/PFS, CFP®
