How to Put Your Financial Affairs in Order

04/07/20

Crises make us see the world differently. Things that seemed important yesterday can quickly become overshadowed by fast-changing events. Conversely, parts of our lives that we might have let drift can suddenly feel like priorities.

The COVID19 pandemic and related volatility in financial markets may be causing such a reordering of priorities. In fact, for investors who find themselves unsettled by the stomach-churning events of recent months, taking some time to reevaluate their priorities could feel like something of an opportunity to be seized.

The good news is that research has shown that using specific moments in time to make a fresh start can work. The idea is to create an “old me” and a “new me” where the dividing line is a particular point in time—New Year’s resolutions are a popular example, but a crisis can also work—and then using that “temporal landmark” as motivation to correct any errors.

So if this crisis has you thinking about your financial life, consider revisiting your priorities, your resources, your goals, and your tolerance for risk. Now could be the time to assess where you are and come up with a plan for where you want to go next.

Step 1: Create a budget for life

When it comes to finances, life can be viewed as cash flowing in—and out. Saving and investing during your working years, if you stick with it, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Drawing up a budget and net worth statement can help you create a road map and stay on track. Here are steps that can help:

Step 2: Manage your debt

Debt is neither inherently good nor bad—it’s simply a tool. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset to pay back over time, such as a home. However, problems arise when debt becomes the master, not the other way around. Here’s how to stay in charge.

Step 3: Optimize your portfolio

We all share the goal of getting better investment results. But successfully jumping in and out of the market as it rises and falls is difficult and can be counter-productive. So create a plan that will help you stay disciplined in all kinds of markets. Follow your plan and adjust it as needed. Here are ideas to help you stay focused on your goals.

Step 4: Prepare for the unexpected

Risk is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises—an illness, job loss, disability, death, natural disasters or pandemics. If you don’t have enough assets to self-insure against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often, but are expensive to manage yourself when they do. The following guidelines can help you prepare for life’s unexpected moments.

If you’re tech-savvy, consider storing inventories and important documents on a portable hard drive. It’s also a good idea to have copies of birth certificates, passports, wills, trust documents, records of home improvements and insurance policies in a small, secure “evacuation box” (the fireproof, waterproof kind you can lock is best) that you can grab in a hurry in case you have to evacuate immediately. Make sure your trusted loved ones know about this file as well, in case they need it.

Step 5: Protect your estate

An estate plan may seem like something only for the wealthy—but there are simple steps everyone should take. Without proper beneficiary designations, a will and other basic steps, the fate of your assets or minor children may be decided by attorneys and tax agencies. Taxes and attorneys’ fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones.

Taking control

We can’t control what’s in the headlines, but we can take steps to bring some order to our own affairs. On that note, here are a few suggestions for tackling your financial to-do list:

Original article By Rob Williams and found here.

Image by Free-Photos from Pixabay

 

 

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