Mid Year Financial Check

It’s commonly known in Seattle: Summer is when the months of grey skies finally reap dividends.

Blue skies, mountain views, green everything. All types of water: bays, lakes, the sound, rivers, the ocean.

So the last thing on most people’s minds is any kind of financial thinking, let alone financial planning.  But there’s a quick way to make sure you are on top of the most important parts of your financial life.  These tasks apply to any part of the year, but if you are wanting to streamline to the most salient, here they are:

1) Use only one credit card. Use it for all purchases. Then, at the end of your billing cycle, look at all your transactions.  If you can’t remember any given transaction, you are not in control of your spending habits. If you aren’t able to pay it off in full every month, you are not in control of your spending habits.

2) Forecast out what your big expenses/activities will be for the next 3 months.  This will help you to manage your spending so that you stay within your range of monthly spending.  The way it works: You know you have a service check coming up for your car.  It’ll be $300.  Forecast it out for which month it’ll occur.  When that month starts, remember that you already have spent $300. This will be your counterbalance when you want to make an impulse purchase.

3) Check your retirement accounts: Look at the fact sheet for each of your mutual funds/ETFs. Here’s what you’ll be looking for:

  1.  Expense ratio: Know how much it’s costing you. This will be represented in the form of a percentage. If the percentage is over 1% you very likely are totally getting ripped off.
  2.  Asset Class: Large Cap, Small Cap. Value, Blend, Growth.  International or Domestic. This just allows you to know what the profile of the fund you own is.
  3. Passively managed or actively managed:
  • Is it an index fund? Then it’s passively managed.
  • Is there any language around fund managers? Or a sentence that says ‘X funds objective is to be agile to market changes by building the fund portfolio, stock by stock, to align to investor expectations.’? Then it’s likely actively managed.  Language around utilizing a certain investment style or responding to market changes is likely actively managed.  Actively managed isn’t always a bad thing. There are some quality actively managed funds. Just know if it’s actively or passively managed so you know what you own.

These tasks can easily be done in a couple of quiet evenings.  They aren’t the extent of financial planning tasks, but they are the most important.