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By Lee Matthew / Illustration by Robin McClannahan
Lee Matthew is a financial planner in Albuquerque. She is an associate of Kathleen Winslow & Associates, LLC, and an investment adviser and registered representative with Financial Network Investment Corporation, a securities broker/dealer (member SIPC).
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SAGE September, 1999
Now is the time to take stock of your cash flow before busy season hits
Maybe you've noticed that the sky is already a little darker when you get up in the morning. Well, it's true: The days are getting shorter, and summer will be over before you know it. So get the jump on a busy fall by reviewing your finances now.
Here are some key questions that might indicate areas in need of attention:
1. YOUR CASH FLOW: DO YOU KNOW WHERE YOUR MONEY -- ALL OF IT -- IS GOING?
Keep tabs on your income and expenses for a couple of weeks: Is there any "disappearing money" that can't be accounted for? If so, carry a little notebook around for another couple of weeks. Write down every single expense, whether you pay by check, cash or charge card. And speaking of cards, if you carry an ongoing balance, the interest charges are money down the drain. Develop a plan to pay them off, and keep them paid off.
2. YOUR SAVINGS: DO YOU HAVE AN ADEQUATE CUSHION IN A SAVINGS OR MONEY MARKET ACCOUNT?
In today's volatile markets, it's more important than ever to separate your short-term money from your long-term money, keeping a short-term reserve to cover unexpected expenses. That
way, you might be able to avoid a forced sale of your investments during a temporary market decline. The size of your short-term reserve will depend on your spending patterns.
3. YOUR RETIREMENT: CAN YOU AFFORD TO RETIRE?
You might want to ask your financial planner to update your retirement projections. Are you still on target? Be sure you're making the most of your 401(k) or self-employed retirement plan opportunities. Check your eligibility for a Roth IRA: If you make less than $95,000 (or $150,000 filing jointly), you can set up and fund a Roth in addition to any other retirement plan.
4. YOUR PORTFOLIO: SHOULD YOU MAKE ANY CHANGES IN YOUR INVESTMENTS AT THIS TIME?
You might want to consider making some changes if one or more of the following apply: You own too many funds; you're holding on to consistently weak performers; your allocation has gotten out of balance; or you aren't able to live comfortably with the current volatility of your portfolio. If you have any questions about your investments, this might be a good time to make an appointment for a review with your financial adviser.
5. YOUR TAXES: ARE YOUR ESTIMATED PAYMENTS ON TARGET?
If you're self-employed, you should be reviewing income actually received and projected every quarter to be sure your estimated payments are accurate. If you're an employee, check your withholding against last year's tax return: You don't want to under-withhold, but if you're withholding too much, you've essentially created a savings fund that doesn't bear interest -- you'd have been better off withholding less and stashing the difference in a money market fund.
6. YOUR DISABILITY COVERAGE: WOULD YOU AND YOUR FAMILY BE PROTECTED IF YOU LOST YOUR ABILITY TO EARN AN INCOME?
If you work for a living and you have no disability coverage, then you basically have no financial plan. At age 42, your chances of becoming seriously disabled are four times greater than dying before age 65. Remember that your earning power is your greatest asset: For example, if you are 35 years old, currently earn $30,000 a year, and your income grows 5 percent a year, you will have earned $2 million by age 65. Disability insurance might help protect that $2 million asset. Read the fine print on your policy and be sure you understand what all the terms mean. Review your policy with your financial adviser. Your future could depend on it.
7. YOUR ESTATE: ARE YOUR WILL AND POWERS OF ATTORNEY CURRENT?
You should have these documents in place, regardless of your net worth. And if the value of your assets (including life insurance proceeds) is close to or larger than $650,000, see your adviser about tax-saving estate planning opportunities.
