Getting Your Finances in Shape

Getting Your Finances in Shape

Feb 09, 2015

Tax time is the best time to reevaluate where you stand financially and to make a plan to reshape your finances in 2015.

Here are seven things you should be doing while preparing to file your tax return:

  1. Create a budget and pay yourself first. If you're not sure where your money is going, track your spending using a spreadsheet. (Go to and click on Making a Budget.) Determine how much money you need to cover your fixed monthly expenses, such as your mortgage and car payment. Then determine how much you'd like to put away for retirement and other large expenses. A good rule of thumb is to save 10% of pre-tax income starting with your first job in your 20s.
  2. Calculate your personal net worth annually. It doesn't have to be complicated. Make a list of your assets (what you own) and subtract your liabilities (what you owe) to determine your personal net worth. Don’t fret any short term declines. What's important is to see a general upward trend over your peak earning years.
  3. Prepare for emergencies. Build an emergency fund with three to six months worth of essential living expenses in a savings account or money market fund.
  4. Keep your total debt load manageable. Don't confuse what you can borrow with what you should borrow. Keep the monthly costs of owning a home (principal, interest, taxes, and insurance) below 25% of your pre-tax income and your total monthly debt payments (including credit cards, auto loans, college loans, and mortgage payments) below 35% of your pretax income. Realtors will suggest higher percentages, but they aren’t worried about you saving for your retirement, college expenses, or building up an emergency fund.
  5. Base your investment mix on your time frame, risk tolerance, and long-term goals. Revisit your investment asset allocation and make sure you adjust the mix annually based on the growth. The years 2013 and 2014 were good years in the stock market. Now is a great time to “take your gains and run." Reinvest these gains in high quality fixed investments like guaranteed annuities. Diversification in many asset classes and types reduce risks and is a critical factor in helping you reach your goals.
  6. Prepare for the unexpected. Risk is a fact of life. Your financial life can be upended by all kinds of disruptive surprises—an illness, job loss, disability, death, natural disasters, or lawsuits. Resolve to get your insurance in shape. Purchase life insurance if you are underinsured. Protect your earning power with long-term disability insurance. Obtain a personal liability "umbrella" policy with coverage of at least $1 million, in case you’re at fault in an accident or someone is injured on your property.
  7. Protect your estate. Update your will, or if you don’t have one yet, prepare it this year. Without an estate plan, the fate of your assets or minor children may be decided by attorneys, government bureaucrats, and tax agencies.

Call your Western Fraternal Life Agent today to help you reshape your finances.

Category: Financial

Julie Cole


CFP®, FLMI, Annuity Product Manager

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