By Scott Hume
What’s your money personality? This is a question that most have never been asked but which can help you understand how you think when it comes to money. Is updating your budget and reviewing your portfolio exciting for you? Or would you rather be able to just avoid your accounts all together and hope for the best? It may not be comfortable to admit, but if you’d prefer the latter, you are not alone.
The reality is that 4 out of 10 Americans admit that they prefer not to think about money. (1) And if we’re being honest, it’s understandable. For many of us, handling our finances can seem arduous—at best. It can even feel downright hopeless for those who are facing some worst-case scenarios. And to add to the challenge of it all, there is an overwhelming amount of information to sift through in order to try and figure things out on your own. In fact, many are stuck wondering where to even start! We at Salish Wealth Management would like to help get you going in the right direction. For starters, here are 5 actionable steps to take now to get your financial house in order.
1. Create Organized Systems
Create A Filing System For Hard Copies
Despite the fact that our lives are becoming more and more digital as companies do their best to go paperless, there are still instances where physical documents are needed. One of the cons of having paper hard copies is that everything you need is not auto-organized into one easy-to-access place like is usually the case with digital files on your computer. So, in order to avoid clutter and misplaced documents, it is imperative that you find a filing system that works for you. Whether it’s a binder, a locked filing cabinet, or a fireproof safe, having a designated place for important paperwork will help you avoid stress and remain organized and prepared.
To start, separate your paperwork into three categories: bills and statements, important documents, and other miscellaneous paperwork that needs to be saved. Gather everything together neatly and store it in one place that is easily accessible. Avoid overwhelming clutter by regularly clearing out and discarding items that do not need to be saved.
Utilize A Password Manager Tool
Do you have several usernames and passwords? Do you have a method for keeping track of all those different, highly sensitive combinations? As discussed with paperwork, you can save yourself some serious inconvenience and frustration by finding a way to keep all your log-in information in one place. Luckily, there are plenty of online password managers to choose from. Just remember, no matter how you decide to organize your log-in details, be sure to regularly update your passwords in order to protect yourself from hackers.
No one enjoys having all that paper piled up on your counters between the bills and other random documents you get in the mail each day. Get rid of clutter by enrolling in paperless document delivery for all your bills and financial services. Not to mention, you get to enjoy the added perk of saving a tree in the process. And since you’re already planning to create a password management strategy in the step above, you won’t have to worry about being unable to access your documents due to forgetting your log-in information. If you forget a password, simply look it up and be on your way.
Develop a master directory that lays out all your financial information and where it can be found. This will not only help you manage your affairs but also serve as a guide for your family members in the event they need to assist you with your finances. Be sure to include account numbers and logins, including your password manager tool of choice. You can give a copy of this document to a few trusted family members or keep it under lock and key with other vital documents, such as your will and life insurance policy. Just be sure to let someone know where it is!
2. Set And Follow A Budget
A huge part of achieving financial order is being aware of your current financial status and spending habits. Figure out how much money is coming in and going out of your bank account each month and then develop and stick to an effective budget. Those who fail to complete this significant step usually find themselves scrambling to pay bills or wondering where that recent paycheck went. Once you have established an up-to-date budget, you can see your financial situation clearly and decide exactly what amount will go where, turning chaos into stability, no matter the amount.
A budget helps you understand your current needs, establish parameters for operating your household, determine whether or not your goals are achievable in your desired time frame, and may even free up some extra funds to place in savings—which will reduce stress in the event of an unexpected incident, such as an automobile-related emergency or medical injury that requires time away from work.
3. Take Advantage Of Automation
Automating your bills and savings streamlines your time by taking some of the unnecessary tasks off of your ever growing to-do list, freeing you up to tackle more lucrative activities. It can also have long-term benefits for your financial world. Paying your bills automatically tends to improve your credit score, makes budgeting simpler, and can also make income tax preparation easier. Not to mention, many companies have set up incentives to enroll in autopay, which can offer savings that are sure to add up over time!
Additionally, by automating your savings, you set yourself up for success by saving your desired amount before you can even touch the money. We all have great intentions of saving a certain amount each paycheck. However, if we’re being honest, once the money is in hand, there is usually an impulse buy that takes a portion of that savings before it ever even hits the account. For many of us, simply getting the money into savings is the hardest part, so automating this process removes that battle.
4. Tackle Your Debts
If you truly want to achieve your goals, one of the most vital primary steps you need to start taking now is to eliminate your debt. When you are paying 10-30% interest on any number of credit cards or loans, you are drastically cutting down on the money you have available to put toward your goals. When is the last time you sat down to calculate how much money you give away each month simply in interest? It should be a top priority to stop giving that money away as soon as possible.
Become relentless about reducing your debt and interest costs. Consolidate accounts where you can, as this often lowers interest and simplifies payments. If you have a loan with a significantly higher interest rate than the others, you want to work on paying that one off first. Or, if you’re feeling overwhelmed by debt, try paying off the loan with the smallest balance first, no matter the interest rate, in order to gain some momentum and confidence with a small victory.
In order to avoid accumulating more debt, establish an emergency fund as soon as possible. By creating a liquid, easily accessible savings account, you won’t have to rely on debt to cover those inevitable life expenses, such as home repairs or medical bills. Create this cash cushion by putting aside money from each paycheck until you have enough to cover approximately three to six months’ worth of living expenses. You will never regret having an emergency fund ready when you need it.
5. Create Or Update Your Will
It’s estimated that nearly 70% of Americans die without a will. (2) Some people may avoid completing their wills simply because they don’t like to acknowledge that they will die. Others may put it off because they have a false impression that it’s a complicated and expensive process, or they simply don’t see the need for one in the first place. But the truth is that the value a will provides your loved ones and heirs far exceeds the cost and effort required to create one. In the simplest of terms, a will allows you to ensure that you can leave a legacy to your desired beneficiaries, from physical household items to assets. Without a will, the State will determine what will happen to your assets, and the process for your survivors and heirs becomes much more complicated and time-consuming than it should be.
If you don’t already have a will, it’s time to work with an experienced professional to create one. If you have created one in the past but haven’t reviewed it in five or more years, it’s time to review and make any necessary updates. These are things you do not want to leave to chance.
Ready To Get Started?
Working with a financial advisor is so much more than just picking out a few investments and setting up monthly contributions. Here at Salish Wealth Management, we add value to your financial situation and your life by helping you create the most effective personalized financial strategy to reach your goals and dreams. Then it is our top priority to make sure all the important details are taken care of so you can have confidence in your financial future. If you want to benefit from the knowledge and experience of a financial planner as you get your financial house in order, reach out to me today at (360) 671-5900 or email@example.com for a free 30-minute portfolio review, and together we will develop a plan to get your finances in order and working for you!
About Scott CFP®
Scott Hume is the founder of Salish Wealth Management and a CERTIFIED FINANCIAL PLANNER™ with more than two decades of experience. Prior to forming his firm, he managed two local financial firms. Today, he works with affluent individuals, families, and local businesses to help them plan and execute their financial goals, providing comprehensive financial planning and cross-border investment management. In his free time, Scott likes to spend time with his wife, Darlene, and children, Claire, Curtis, and Corbin, on their hobby farm raising lambs, chickens, and pigs or visiting his grown daughter, Chelsey, in Eastern Washington. He is an active member of The Rotary Club of Bellingham, Bellingham Chamber of Commerce, and The Estate Planning Council. In addition, he is very involved in the local aviation community and is an active member with Cornwall Church, volunteering his time to financial counseling and serving on mission trips in South America. Learn more about Scott by connecting with him on LinkedIn.