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Victoria, TX 77901

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A Financial Checklist For 2016

Assuming you survived the parties, the eating and the football games, now it is back to reality. A new year has arrived with many of the same hurdles to overcome. For so many Americans getting their finances in order is at the top of the list. Quite often, this is an overwhelming task. However, if you focus on a few major issues you can make significant progress to improving your financial picture.

First, assess where you are. Compile your net worth statement in a realistic manner. The net worth statement should be a simple list of all your assets and your liabilities.

Prepare a second one listing only your liquid assets—but all of your liabilities. This is reality. So often we fool ourselves regarding the liquidity and the value of our illiquid assets. You will not know what a piece of land, a lake house, car, boat or other illiquid asset is truly worth until you go to sell it.

Secondly, make goals for your liquid assets and put them in writing. How much do you want to increase your liquid assets and how much are you going to pay down your liabilities? Determine what it takes to get there by setting aside a bit each month or paycheck. If you try to do it all at once, it will never happen.

Your assets are there to serve you. Having a nice cushion of cash and securities offers flexibility. Recognizing this, know it is your life to lead. Do not pattern your life after your neighbor. I guarantee that behind closed doors, reality is far different than what is apparent by shiny cars and a big house. Focus on improving your financial stability as opposed to having a big show.

Put your saving goals at the top of your budget. If you treat “saving/investing” as the most important bill to pay, you will do it. If savings is an after-thought, then most likely something else will speak for those assets and you’ll make no progress.

Determine how much money you need in emergency funds. If you have appropriate insurance for home, auto and health, then six months of living expenses in cash is usually sufficient. However, if you are a worrier, or work in a cyclical industry like the oil field, maybe you bump that figure up to nine or twelve months of living expenses.

Get it in writing. There is a constant parade of hucksters waiting to take your money for the latest “get rich quick” scam. Take your time and ask lots of questions. If it sounds too good to be true, it usually is.  Rarely is there a need for fast decisions. Request full disclosure of fees and conflicts of interest.  If they won’t put it in writing, then don’t do it.

Map out what is necessary to fully fund your 401(k), IRA or other retirement plans. Make sure to contribute enough to receive your employers full match. If you have a non-employed spouse at home, you can still fund an IRA for them too. If you make too much to contribute directly to a Roth, consider converting part of your traditional IRA to a Roth.

Check the beneficiary designations on any bank, brokerage or life insurance accounts. Recognize an account with a beneficiary designation will supersede the language in your will. As such, they need to be properly coordinated and reviewed annually.

Sit down with your insurance agent to review liability coverage. It is relatively easy to make money in our society. However, you stand at risk for losing your hard earned assets if you don’t have properly structured catastrophic risk management in place.

Map out your Instruction Manual for Life. If you are dead or incapacitated tomorrow, will your loved ones know who to call, what assets you have or what your wishes are? If not, write it out and let loved ones know where you keep this document.

Stock market assets will be bumpy—it is a virtual certainty. Be realistic about your ability to handle volatility. Invest in those assets based upon where you want to be in ten or more years. That does not mean that you try to time the market and jump in and out every week.

Although these are relatively simple ideas, hopefully they will add value and stability to your family’s finances in the New Year.

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.

Originally published Decebmer 5 2015, Victoria Advocate