Your Three Month Financial Checklist

July Cashflow update: Completing your three month financial checklist

Every quarter I sit down and complete a personal financial statement (PFS).  As of June 30, 2014, my PFS will show all my assets, all my liabilities and the resulting total net worth.  I use an Excel spreadsheet, so each quarter has its own tab.  I compare each quarter’s results with the last quarters’ results to see if my net worth increased.  Yes, it is good if the number is larger quarter over quarter.

But what should you really glean from your PFS?

Here are five key take-aways from your PFS:

Did I overspend this quarter?

If your net worth decreased quarter over quarter and it wasn’t due to an emergency or down-turn in the stock/bond markets, then you may have overspent during the quarter.  Take the time to know why.

Paula Cashflow tip:  It’s important to sit down every three months and review your finances.  Overspending can be reigned in sooner rather than later.

What is the balance in my emergency fund?  If you are in the accumulation phase of building this fund up, then did you meet your target?  If you have already established the fund, then you should ask yourself:  Did I tap into this fund during the quarter?  If so, then for what purpose?  Unplanned car repairs.  Unplanned healthcare costs.  The key word here is “unplanned” and “emergency”.

Paula Cashflow tip:  Super-charge your emergency fund.  The days of 3-6 months of living expenses for an emergency fund ARE OVER!  Shoot for 6-9 months and then 12 months, after you hit the nine month figure.  Include funds for your auto/home insurance deductibles in addition to monthly living expenses.  What other costs should you include to supercharge your emergency fund?

What is my overall debt picture? How does this quarter compare to last quarter?  Did you spend more or less?  If you do not pay off your credit cards in full each month, this could be an indicator that you are living ABOVE your means.  If you do pay them off in full each month:  Congratulations!!  Still, you should compare the balance this quarter to last quarter to smell test your spending patterns.  As for mortgage debt, this exercise should reveal a reduction in mortgage debt.

Paula Cashflow tip:  Reserve credit card usage for non-discretionary spending, i.e. groceries, gas, budget line items, or large dollar purchases whereby the credit card provides insurance or buyer protection.  Keep your mortgage amortization schedule handy so you can make additional principal payments when your cash position is favorable for the quarter.

How did my investments fair?This will include your 401k, IRAs, taxable accounts, etc.  When you combine the results of this spreadsheet with information gleaned from 401k statements, etc. you can review your asset allocation mix.  For example, if your target asset allocation mix is 50/50 (this means 50% stocks and 50% bonds and cash), what do your results reveal?  With the current rising stock market, are you in need of rebalancing your portfolio?

Paula Cashflow tip:  Rebalancing your portfolio is relevant for all investors at all levels and can be done each quarter and at least semi-annually.

Am I on target to achieve my goals?  This should include evaluating short-, medium- and long-term goals.  The first three exercises above should set you up nicely for answering this one.

Paula Cashflow tip:  Use the spreadsheet to include notes about what goals are short-, medium- or long-term goals.  For example, a short-term goal could be a super-charged emergency fund.  This fund can serve to create financial security during turbulent job market times, something most of all will never forget from the financial crisis days.

I’ve been doing this exercise since early 2002, so I know you can do it.  My competitive spirit compels me to stick to my goals as I create financial freedom.  It’s now time to stop writing, because I realized that my 6/30/14 tab is blank.  Get to work on your PFS.  See you in financial freedom land real soon.

Because it’s about life and how you live it.

In the spirit of financial well-being,

Paula Cashflow

5 Ways to Deal with Housing Costs

What does the current housing market mean for your future finances?

Whether you’re a renter or a home owner, it still means just about everything when you’re building wealth.

Why?  Because the price of home ownership is usually the single largest line item of a budget.  If you don’t get your hands around procuring long term affordable housing, your financial future might be stalled. Continue reading

Net Spenders Guide to Big Savings

Financial freedom is not just for net savers. Everybody needs to start embracing financial autonomy.  Becoming a net saver, by choosing to save your discretionary dollars versus spending, is a good way to start.  Even if you fall into the category of “net spender”, I have news for you, you can become financially autonomous with a little behavior modification.  Continue reading

Addressing Your Failures

Addressing your failures to expedite your successes.

Let’s take a moment to reflect upon the following:

“If you never try, you never fail, but if you never fail, you never get the chance to better yourself.” Unknown

“Successful people do what unsuccessful people are not willing to do.” Jim Rohn

As I contemplate the above passages, I am grateful that one of my readers pushed me to write about the proverbial “F” word – Failure.  It’s clear to Paula Cashflow that you can’t blog about reinventing yourself, become better at asking for more money, or become better at public speaking, without the risk of failure. Continue reading

Did you get a Raise or COLA? (Part Two)

In Part 1, we reviewed the difference between getting a raise and getting a COLA and declining wages. In Part 2, we’ll review the personal impact this has on your income and actions you should take. (Part 2 of a 2 part series.)

After you have calculated the numbers from Part 1 and have a degree of comfort with your numbers, what is the next step to addressing declining real wages?

Looking at your numbers from Part 1, subtract your answer for number 1 from your answer for number 2. If the number is positive, then obviously your current salary is under the market rate. Are you comfortable with closing the gap? If you combine this difference with a history of COLAs, are you even more comfortable moving forward with closing the gap?

Here’s where you can measure whether you have mastered some of Paula Cashflow’s behavioral concepts covered in past blogs, such as becoming a persuasive speaker. Continue reading

Did you get a Raise or COLA?

Do you know the difference between getting a raise or COLA? A look at how declining real wages are impacting you. (Part 1 of a 2 part series.)

Getting to financial freedom has many components, as you’ve probably gleaned from past blogs. But one of the more important concepts that you must grasp is the ongoing battle against declining real wages.

What is meant by “declining real wages”? Even before the financial crisis, wages were in a negative holding pattern, meaning wages were rising slower than inflation. This means that your annual raise wasn’t really a “raise”. It was a “COLA”. Continue reading

Flight Attendant Smell Test for Finances

When was the last time you flew on a plane? Allow me to paraphrase the Flight Attendant’s spiel:

“…Seat belt buckle…pull buckle…release buckle. Seat back/tray tables upright. Turn off all electronic devices…when the cabin loses pressure…mask will drop…place mask over nose…secure tightly…don’t forget to breathe…Oh, and if you’re travelling with a little one…” What happens next? Continue reading

Toastmasters 101 – and other ways to reinvent yourself

Never in my wildest dreams did I ever think I would be good at public speaking. But if you’ll allow me a moment to toot my own horn, the feedback I’ve gotten has been overwhelmingly positive. I’ve been told that I’m at my best at memorials or funerals. Okay that’s scary, but that feedback came from my nephew, he’s a pretty sharp guy, and my good friend Liz, and…well, she’s always right!!

You’re probably wondering why Paula Cashflow is blogging about public speaking. What does my quest to be an excellent, highly sought after public speaker (and not just for memorials) have to do with Cashflow? Continue reading