Time to refresh your PFS or Personal Financial Statement.
Back in July, I introduced the concept of quarterly financial updates. If you choose to work with a financial advisor, chances are they will encourage quarterly meetings. I usually did with my client base. Although, I found that my clients after a year of these meetings were comfortable with the relationship and chose to forego the quarterly meeting. This was actually okay, because I was working behind the scenes keeping close watch over my client’s overall financial picture.
Quite honestly, you should keep a close watch on your financial picture too if you’re a “do-it-yourselfer”. I have no problem with the DIY strategy. Paying advising fees on top of fund fees can eat into your investment balances, especially if you’re under $500k in investable balances, not including your primary residence.
If this is your case, then keep it simple:
1) Limit investing to pre-tax accounts, i.e. 401(k)s.
- Strive to max out the employer match
- Stick to your chosen asset allocation and re-balance at least annually and perhaps semiannually depending upon market conditions
- Consider using low cost index funds
2) Strive to eliminate credit card balances that are not paid off in full each month
3) Supercharge your emergency fund
- You never know when you’re going to need it.
- This is key during unstable job markets and volatile economies
- Make sure to include all your insurance deductibles and property tax payments in addition to a set number of months of living expenses – shoot for 12 months
4) Control overspending – NEED I SAY MORE?
5) Manage your mortgage balance
- Just because you have a 30 year mortgage does not mean you need to take 30 years to pay it off.
- Run the numbers for 25 years or better yet 20 or even 15 years.
So it’s now October and time to refresh your PFS for the quarter ending 9-30-2014.
Keep these things in mind when updating your PFS at this time of year:
- Did my liabilities go down?
- Did my non-investment account assets go up?
- How did my investments fare compared to market indices?
- Are my savings and investing goals on track for me to reach my goals?
- Am I on track to not overspend going into the holiday season?
- Am I on track to fund my retirement accounts by year-end as planned?
- Am I doing everything to minimize my income tax liabilities for the year?
My excel spreadsheet 9-30-14 tab is empty. I must get busy. This quarter is not the time to skip this exercise. Too much is at stake. This is the time for preparing for holiday spending, minimizing income tax liabilities, planning for 2015 expenditures, and building financial freedom.
Get busy. Because it’s about life and how you live it!
In the spirit of financial well-being,