Guest Author - Cate Brizzell

It’s that time of year again!

It’s fine to resolve to finally clean out your closets, organize your photos and weed through your medicine cabinets this new year, but don’t forget to give yourself financial peace of mind as well. The top of your resolution list should include a full home finance checkup.

Depending on your situation, a complete checkup would take anywhere from one rainy afternoon to a full weekend. Your goal is fourfold: organize your records, set or change goals, evaluate your current position in light of your goals, and create or adjust your spending, savings and investment plans for the new year. It’s important to review your personal finances annually at a minimum, since life changes can drastically change your goals, plans and financial situation.

Organizing your records will help you find what you need, when you need it. You’ll save time as well as money. Not only that, even though it may not be something you want to think about, organizing your finances is an essential part of your estate planning. Don’t make a difficult time worse for the ones you love; make it easy for them to find what they need to put your thoughtful plan into action.

Goals are absolutely essential to financial success. If you don’t have short-term and long-term home finance goals, now is the time to put them down on paper. Studies show that people who write down their goals almost achieve them, while the converse is true. Not having any goals virtually guarantees that any success is an “accident”.

Financial goals can fall into four categories: spending, debt, savings and investments. Possible timeframes to work with would be 1, 5, 10, 15, 20 or 39 years from now. Write your goals down and review them often. It doesn’t have to be overwhelming and difficult. Just make sure they’re realistic and measurable.

For example, a short-term home finance goal may be to reduce your spending 20%, so you can put an additional 20% into savings and retirement funds. A 5-year debt goal may be to have all student loans repaid. A 20-year investment goal may be to have over $500,000 accumulated in a 401(k). Whatever your goals, make sure you can break them down into yearly, monthly, weekly and even daily goals. It’s easier to eat an elephant one bite at a time!

Once your goals are set, evaluate where you are right now in relation to those goals. If your finances are organized this won’t take long. What’s the gap between where you’d like to be and where you are now? Are you on track? For each goal category and timeframe, make a note of where you need to change or improve your current system.

The final step in your annual home finance checkup is to set up new plans or adjust current plans to get you back on track in terms of your goals. Again, work from the four major home finance categories and the various timeframes you’ve selected.

Take advantage of online banking and investment services to automate your finances as much as possible. By depositing savings and investments automatically from each paycheck, you don’t have to trust yourself to make transfers and you aren’t tempted to spend money earmarked for long-term purposes. Similarly, by setting up regular monthly bills to pay automatically, you avoid the hassle of making sure they’re paid on time. If you’re worried about forgetting to subtract automated payments from your check register, use separate checking accounts for regular bill payments versus discretionary spending.

Don’t forget to check your current investing plan. What stocks or funds are you contributing to right now? Where are all your current accounts and balances? Decide on a total overall mix of investments, stocks versus bonds. Then evaluate all your holdings, not just those in separate accounts. Make adjustments where necessary to bring your current holdings in line with the mix you’re most comfortable with. Check the performance of the investments you hold and make sure you’re happy with the results. If you aren’t comfortable doing this, either educate yourself by checking free books out of the library or consult a fee-based financial planner. Keep in mind that commission-based financial planners may not be as unbiased as you’d like.

There’s nothing like the fresh start that comes from a new year, and there’s nothing like the peace of mind that comes from knowing you’re financially secure. Schedule this year’s annual home finance checkup, and enjoy both!