This week's Check It Out – Check It Off is about personal finances and nine ways to make your 2009 financial picture more focused.
Always, of course, consult your advisor before making any final decisions about investments. Our contributors:
Becky Keenan is president of Network Financial, with an office in the Dilworth area of Charlotte. She is an investment advisor and certified estate planner specializing in estate and retirement planning.
John Gugle is a principal of Alpha Financial Advisors in the Ballantyne area of Charlotte and is a fee-only financial planner and investment advisor.
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Look at the big picture
“Finances” are not just about investments. A family's financial picture has lots of brush strokes, such as investment, insurance, income, taxes, real estate, debts and anticipated expenditures. Being financially secure requires integrating all aspects of a person's life. Start with a realistic look at your own financial picture. A net worth statement will help compile all assets and liabilities. A cash flow statement breaks down the money that comes in each month and how it's spent. Together, these tools provide an overview of where you are financially and how your income and expenses compare. Keenan
ACTION 1: Create a “net worth” statement and a “cash flow” statement.
Estimate your tolerance for risk
Those who thought they had a high risk tolerance in the market may have found that they really don't during rocky times. An individual's tolerance for risk should determine how investment funds are managed – higher tolerances usually mean more stock exposure; lower tolerances usually mean more fixed income and cash investments. Additionally, your risk tolerance, plus your evaluation of job and financial security, plays into the amount of “cash” (liquid reserves) to have handy. Many financial advisors typically suggest a cushion of six months or longer. Gugle
ACTION 2: Call your investment advisor and reassess your risk tolerance, or go to a financial Web site and take a short quiz to get a snapshot of your risk tolerance.
ACTION 3: Evaluate your “cash cushion” and look at ways to achieve that goal.
ACTION 4: Look for ways to pay down debt, eliminate discretionary expenses, and increase saving and investments.
Protect all of your assets
For many of us the focus on protecting our family and assets begins and ends with preparing a will. In reality, a will covers very little. An asset with a beneficiary designation such as a retirement account, life insurance and even many investment accounts are not covered by a will. Reviewing and updating beneficiary designations on accounts is important to ensure family and loved ones are protected. Keenan
ACTION 5: Review and update beneficiaries on accounts and policies
ACTION 6: Consult an estate planner to discuss important legal documents such as a durable power of attorney, living wills, medical power of attorney and revocable living trust.
Learn about market cycles
What we have experienced in the last few weeks has been a blend of rational thinking about the market and emotion. Individuals are better investors if they understand the emotions of markets, not just the numbers. Gugle
ACTION 7: On a Web search engine, look up “Cycle of Market Emotions” and go to a reputable financial Web site to learn about the cycle.
Communicate with aging parents
Many individuals are now care-givers for aging parents. Because the topic of death is difficult, many families are not prepared for the financial issues, conflict and guilt often experienced when a parent becomes incapacitated or dies. Keep the lines of communication open now. Often we misinterpret silence with discomfort, when in reality someone needed to ask “what if.” Pick the right time and place to talk and compile your thoughts and questions ahead of time to remain focused. Keenan
ACTION 8: Begin a conversation with your parents to understand their wishes and help organize their assets.
Filter information overload
With 24-7 news, online financial sites and friends with hot tips, objective information can be tough to find by yourself. This is especially true as financial tools have become more complex in the last 10 years. It's not just about savings accounts, stocks and bonds anymore. Keenan and Gugle
ACTION 9: When appropriate, get professional advice to a) reduce the emotions of investing; b) avoid common investment mistakes; and c) get information from the right sources.