Preparing your finances for 2021
2020 was a doozy! Now its time to start thinking about your 2021 financial resolutions to whip things in shape, take a fresh look at the future and prepare your finances for not only next year but for years to come.
Here are some things to think about while preparing your finances for 2021!
Get Organized! It is hard to know where you are going if you don’t know where you are.
Build a 3 Ring Binder with 8 Tabs
Tab 1: Your Personal Profile, Goals and Values. Gather your basic financial information, last year’s tax return, year end pay stubs, etc. Write out your values and financial goals that align with your life’s plan.
Tab 2: Your Cash Flow Hierarchy/Lifestyle Budget, Net Worth Statement
Tab 3: Your Protection Documents (Auto, Home, Umbrella Declaration pages; Your Summary of Coverage for Life Insurance, Disability Insurance, any Supplemental Insurance and your Health Insurance/Major Medical including Dental, Vision or other plans)
Tab 4: Your Assets (Year end statements of values and balances for your bank accounts, investment/brokerage accounts, 401k/IRA statements, and a summary sheet of any other assets with approximate values such as vehicles, property and so on.)
Tab 5: Your Liabilities (Year End balances of your loans, credit cards, mortgages and any other debts or liabilities.
Tab 6: Your Retirement Plan (Current or future projected monthly income from all retirement sources such as social security, pensions and projected income from qualified retirement plans and other sources of income) Run some retirement trajectory scenarios using any number of online tools or one provided by your retirement plan sponsor/provider)
Tab 7: Your Estate/Legacy Plan (include your legal documents such as Wills, Power of Attorney, Health Care Proxy, Living Will, any other planning documents that apply; If you have charitable wishes or family legacy plans outline them here.
Tab 8: The Action Plan (Create your implementation checklist of action items to make progress on your goals and to address your SWOT Analysis (see below)
Establish Goals - Think about what you want to focus on in the coming year to make progress toward your life’s plan. Write down two or three major goals that you want to pursue. Examples could be reduce or eliminate debt, improve your savings rate, save for kids college or any number of ideas. They must be meaningful to you and align with your values and life’s plan.
Do your own SWOT Analysis: On a sheet of paper write out STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS.
Strengths - write out your advantages as you see it. Where are you doing things right? What should you continue doing?
Weaknesses - write out your areas of weakness. Is your savings rate too low? Do you lack good spending habits? What should you stop doing?
Opportunities - what opportunities are known to you that will help you with your plan? Do you have a raise coming this year? Will you pay off a major debt that improves your cash flow? Do you have something you can sell? A business you can start?
Threats - Measure external factors - how prepared are you? What if you are laid off your job? Do you have enough emergency funds? What if you get sick or injured and cannot work? Do you have disability insurance? What if you die - will your family be taken care of? What if you are sued due to an at fault accident, do you have enough liability coverage? What if the market crashes, does that impact your plan in the short term?
Fix the Action Plan - based on your goals, swot analysis and current plan, establish the actionable items that need to happen this year. Write down what you need to do, what it is related to in your plan, why you need to do it, who is responsible for this (you, your spouse, your insurance agent, broker, etc.) and when the deadline is. Put the plan in Tab 8 of your binder.
Now you know where you are, where you are going and how to get there! Make 2021 your best year yet!
Don’t forget! We all have blind spots and sometimes need an accountability partner to keep us motivated. A good Financial Coach will do all this and provide knowledge and guidance based on experience and best practices. Even the best athletes in the world use coaches to take their game to the next level or keep them sharp.
Contact me for personal 1:1 coaching an my proprietary Financial Excellence ScoreCard and Financial Spreadsheet that coordinates your cash flow, protection, wealth building, retirement, and legacy plans so you can have clarity, confidence and control over your financial future. keith@myfinancialexcellence.com