Use These 5 Questions to Take Your Financial Pulse

I know that the sun has been out all summer, but that's no reason not to take a few minutes out of your year to review some important financial questions. Rather than make things overly complicated, simply answer the five questions below. While this is not meant to be a comprehensive exercise, if you are content with your answers, you are way ahead of the game.

1. Have you decided what the most important things are that you want to do this year and set aside the money you need to make them happen?

  • Did you remember to put your next vacation dates in ink on your calendar?
  • Did you start penciling in golf dates with your buddies?
  • Love going to the spa? Be proactive and plan it.

2. Do you have plenty of money set aside in a liquid account for emergencies or unexpected large bills?

  • I find this gives more peace of mind than anything else.
  • Many people I see have all their money in a non-liquid 401(k). I wish they would have liquid accounts for when the furnace needs to be replaced rather than breaking out their credit card. (For related reading, see: Why You Should Have an Emergency Fund.)

3.   Have you reviewed your investments in the past six months? If you have not, who did?

  • How are they doing relative to their appropriate benchmark?
  • For the past nine years neither the U.S. stock or bond market has seen much of a downturn. If you haven’t rebalanced your portfolio to reflect that occurrence or the fact you are nine years older, get on it.

4.   Is it time to refinance your mortgage, again? 

  • 15-year rates are near 3% and 30-year rates are still low.
  • These days you can refinance even if your loan to value ratio is very low. 
  •  I refinanced my mortgage to a 15-year loan so my mortgage will be paid off about the time my kids are out of college. It will cost me about $600 more per month, but it will shave 13 years off when my home will be all mine!

5.   If you have children and are hoping to help them pay for college, are you taking full advantage of 529 college savings plans?

  • The Illinois 4.95% state income tax deduction for the Bright Directions program is also hard to pass up.
  • The money grows tax-deferred in these accounts and comes out tax-free for qualified college-related expenses.

I find that it is true that most people spend more time planning their next vacation than they do their retirement. It is also true that if you lived on 80% of your take-home pay and saved the other 20% you could accomplish most of your financial goals.

If you are content with your answers to these questions you are way ahead of the game.

Enjoy the wonderful Fall we are in store for.

(For more from this author, see: 3 Ways to Slow Down Your Personal Spending.)