It’s officially spring and time for your first financial checkup of 2013. This is an easy exercise to help you reach your goals for the year.
As part of my own quarterly checkup, I evaluate if I’m on track to achieve the goals I set in January. If I’m not, I analyze what’s gone wrong and how I can fix things.
After that, I stop and determine if my financial condition has changed and decide if I need to adjust any goals.
I start by evaluating my income, which includes any federal and state tax refund I expect to receive. I plan to use my refund to make an extra, lump sum payment on my mortgage loan; doing that every year will cut a few years off the life of my loan.
The good news is that I’ve filed my taxes and expect to receive a refund, so this part of my plan is on track.
For many people, their tax refund amounts to an annual bonus, and I strongly encourage you to apply these funds to a savings or debt repayment plan. It’s always tempting to spend a windfall on getaway weekends, new clothes, dining out and other activities. But once you’ve made these purchases, that money is gone for good.
Next, evaluate your progress on paying down your debt. If you aren’t making significant progress, consider setting aside an extra $50 or $100 month to pay off a credit card or other loans. If there is a major long-term debt that needs immediate attention, such as a student loan, look at all of your assets and see if it makes sense to sell a major asset, such as a car.
Such a move will help you raise funds needed to cut into any major debt.
Third, consider how you will adjust your financial plans to handle any major new “life event.” For example, after recently learning that his daughter received an engagement ring, a good friend now needs to adjust his savings to pay for the upcoming wedding. He’ll likely need to cut back or eliminate vacation plans and other major expenses this year.
But with proper planning, he can save the money needed without borrowing or dipping into any investments.
Next, evaluate your net worth. Review the investment mix in your long-term accounts, such as 401(k)s, 403(b)s and Roth IRAs, and make sure those investments fit your priorities and overall financial plan. The stock market performed well during the first quarter, but understand that it may not perform as well every quarter.
If you need to rebalance your portfolio, now is the time to consider any changes.
Finally, make certain that your home, car and other assets are adequately insured. Medical debt can put a crimp in anyone’s finances, so double check to see that you have a proper health, disability and life insurance, as well as a living will and a power of attorney.