End of the year a good time for a financial checkup

This was originally published on Monday, December 01, 2014, in the Pacific Daily News. Click here to subscribe to the PDN.

It is hard to believe that 2015 is just a month away. The holiday celebrations are in full swing and we are focused on being with family and friends. Many of us are not thinking about our finances, except maybe for those extra holiday expenses. Nonetheless, the end of the year is a great time to give yourself a financial checkup. Performing an end-of-the-year financial review will help you set new goals for the upcoming New Year.

• A lot can happen in a year and if you have experienced a major life change you will certainly need to review and update your financial records. Here are a few things to consider: Did you have a change of job status? Buy, sell or refinance a home? Are you newly married or divorced? Did you move? Did you welcome a new arrival to your family? Did you lose a loved one? Did you or a family member become seriously ill? Did you receive an inheritance or gain extra income such as child support or alimony?

• Your budget: This is one of the easier aspects to review because you use it on a daily basis. Budgets are very flexible depending on your life circumstances. Your budget should be reviewed when major life changes happen, such as a promotion or loss of a job, marriage or divorce, the birth of a baby or retirement. When reviewing your budget, ask these questions: Does your budget reflect your financial situation? Is it helping you meet your financial goals? Have you incurred more debt or paid some off? Has your income increased or decreased? Have your expenses increased or decreased? Are you constantly over budget? Did you have many unforeseen expenses? Have your financial goals changed? By answering these questions, it will be easier to assess and plan out next year’s goals.

• Net worth: Determining your net worth yearly can give you a snap shot of your financial situation. To determine your net worth, you first add up all your assets. Assets would be your home, cash, car, stocks, retirement funds, businesses and other personal property; basically anything you own that has value. Then subtract your liabilities (debt) from your total assets. Debts such as a mortgage, credit cards, loans and other outstanding debt. The total is your net worth. If your assets exceed your liabilities you have a positive net worth. If your liabilities are greater than your assets, you have a negative net worth. Obviously, you want a positive net worth and reviewing your net worth yearly will give you an idea if you need ne three credit reporting agencies. It is up to you if you want a report from all three at once or spread it out over a year. You can request your credit report from AnnualCreditReport.com or by calling 1-877-322-8228. There are many sites that claim to give you a free credit report, but AnnualCreditReport.com is the only one authorized by law. Look at your report for any unauthorized accounts or discrepancies on your payments or credit history. If you find any errors on your report, write the credit reporting company and they will request more information from the agency that is reporting the error. Your credit report will also help you gauge your finances.

• Powers of attorney: Usually powers of attorney have a year to five years before they expire. Check the expiration dates and get them renewed if necessary. If you no longer feel comfortable placing your trust in someone you have named on the power of attorney, terminate it and place someone else that you do trust.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at http://www.moneymattersguam.wordpress.com.

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