How Am I Doing On My Finances?

One of the most challenging parts of managing personal finance is knowing how you’re doing and if you’re making the right decisions. Financial information is spread all over the place, from insurance to banking to employment benefits. Having a clear summary of your finances may seem like a daunting task.

The first step in knowing how you are doing on your finances is to clearly define what matters most to you. By clearly defining the life you want to live, you’ll be able to track and measure exactly how you are doing. You will have a greater incentive to make choices that lead you closer to your goals.

The second step in knowing how you are doing on your finances is to set specific, measurable benchmarks to get you there. Then you can break your bigger goals into smaller tasks, with incremental wins along the way. You’ll be able to know exactly how you are doing in terms of your progress.

Are you ready to start building a life you love? The 5% Pledge, 30 Day Guide to Investing in Yourself, will be available soon as an eBook! Join the 5% Movement and put yourself first. Sign up below to be one of the first to hear when the eBook is launched.

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How Long Should I Keep Financial Records?

Receipts and statements tell the story of your cash flow. Most have no significant importance once you’ve reconciled your account. There are a handful that you do want to hang on to, at least for a few years. Make sure your records are easy to access and kept in a secure place, whether digital or paper.

Tax Returns (including supporting documents/receipts) – keep personal returns at least 3 years after filing (per IRS guidelines). If you file electronically, download a digital copy for yourself. Keep Employment Income tax records for 4 years after filing.

Proof of purchase for valuable assets, keep at least a year after disposing of the item. For warranty or insurance claims, you’ll need to show evidence of purchase. This is really important if you experience a theft, fire or storm damage.

Bank statements, credit card statements and insurance statements you’ll want to keep up to a year. If you purchased something that needs to be documented, keep that statement as long as you have that item. If you had a medical procedure, keep those statements for at least a year after treatment or a year after paid in full.

Some records need to be kept for two years after they’re sold. These include Insurance Policies, Investment Statements (purchases/sales) to establish cost basis, Loan Purchase Agreements, Mortgage Notes and Titles.

Financial documents such as your Will, Living Will, Trust or Estate need to be kept indefinitely and a copy needs to be given to a trusted advisor or family member. Birth Certificates, Marriage License, Passports, College Transcripts and Medical History/Immunization Records should be locked in a safe or safe deposit box.

Start a file and keep adding to it as needed. Clean out old documents that are no longer needed. Keep records backed up for easy access, safe from water or smoke damage.

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How Much Credit Should I Use?

Credit history impacts your future ability to access credit. Much like getting your dream job, experience matters in getting the best credit. It takes time and it requires you to build your skills.

Here are a few tips to build a solid credit history:

  • Think short term – Credit should be used for short term needs that can be paid back quickly
  • Think long-term – choose a Credit Card or Line of Credit that will provide you the best benefits over the long-term (cash back, miles, discounts)
  • Keep your balance under 30% of your available limit. Less than 10% is optimal.

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How Much Should I be Saving?

This question comes up all the time as I work with customers to improve their financial wellness.

“Save for a wedding.”

“Save for a down-payment on a house.”

“Save to go back to school”

We know we need to do it, but can feel overwhelmed with where to start.

Keep it simple and achievable. Crawl before you walk, then run. Begin setting aside at least 5% of your income , or $50 out of each pay period, whichever is greater. Build a cushion that can cover any insurance deductibles you have or three months living expenses.

Invest in yourself first. Make sure you build a solid foundation. Once you reach your goal, you can start rolling that 5% or more into the next bucket you want to achieve.

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What Debt Should I Pay Off First?

Most people use debt for short term needs and don’t intend to keep adding to it. Unfortunately, it’s really easy to overestimate how much debt you can handle and forget to leave room for emergencies.

Regardless of what debt you have, the long term goal is to keep your total minimum monthly payments under 30% of your total take home pay. Here are two different strategies to free up your cash flow and reduce your overall debt load.

  1. Deal with the elephant first – Other than your mortgage payment, what is the next largest monthly payment you owe each month? What is the current payoff? Think about creative ways to pay that off as quickly as possible. Reducing the largest payment will have the greatest impact on improving your cash flow and reducing your debt-to-income ratio.
  2. Deal with the snail – Identify the debt that doesn’t seem to be going down. Usually the monthly payment barely covers the interest each month, so there’s not much paying down the actual principal balance. It just kind of sits there creating a stream of constant income for the lender. Make extra payments as often as you can until it’s paid off.

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How Can I Pay Myself First?

One of the most common questions I get from friends and customers is “How can I pay myself first?” We’ve heard all the reasons why it’s important, yet it seems to be such a big obstacle for most of us. We put it off and hope some day we’ll figure it out. Well today’s your day!

Here are two quick ways to get started building the habit of systematically putting funds in your savings before you can spend it.

Step 1: Deduct your savings before you get paid

If you work for an employer and have direct-deposit, you can request your HR specialist to split your deposit between two different accounts. For example, you can have 10% automatically deposited to a savings account and the rest to your primary checking account. If you receive a paper check or funds loaded on a debit card, ask your bank to deposit 10% into your savings and the rest into your checking account. Set it up and forget about it!

Step 2: Roll it up

Another opportunity to fund your savings is right after you pay off a bill. Since you are already used to transferring those funds out each month, keep it up. Instead of paying someone else, begin transferring that payment into your savings account. Every time you pay something off, like a new phone or a car payment, celebrate by moving that cash flow right over to your savings account. Keep rolling it up!

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Join the 5% Pledge Movement!

Do you feel like you’re running in circles? Do wish you had a better of idea of where your time and money was going? Are you ready to take back the driver’s seat in your life?

Join the 5% Pledge Movement! For 30 days pledge to invest at least 5% of your time in yourself and begin to build a life you love!

The 5% Pledge Movement strives to raise awareness around how you are investing your time and money. These two limited resources are at the core of your financial wellness.

Join the Movement – learn, follow and share your journey – take The 5% Pledge:

“ I pledge to invest at least 5% of my waking hours building a life I love.”

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