|
|
The Annual Review
by Gary Foreman
When I worked in the corporate world the annual performance review was
always important. Not only was it a way of telling how I was doing
compared to what my employer expected, but it was also a good
opportunity to identify areas where improvements could be made.
Sometimes I agreed with the boss' comments. But, there were other times
that I really thought that I could have done a better evaluation myself.
The concept of an annual review can be helpful in your financial life,
too. There are certain things that you should evaluate on a regular
basis. And it's also a good idea to look at your own performance
periodically. Most of us have some areas where we could do better if
we're willing to make minor changes. So let's perform an annual review
of our finances. In this case you'll be reviewing yourself. So if you
don't like the score you get you'll know exactly where to go to
complain!
Have you reviewed your auto insurance within the last year? As your cars
and family grows older your needs will change. And, you might find a
better rate by shopping around. 3 points for checking for appropriate
coverage and comparing rates. 1 point for checking either. 0 points for
thinking that your brother-in-law the insurance agent is taking care of
it!
Have you reviewed your homeowner's insurance in the last two years?
While not as likely to change as your auto policy, homeowner's coverage
still needs to be reviewed periodically. 3 points if you reviewed it
this year. 1 point if you reviewed it the year before. 0 points for
thinking that you only need to look at your homeowner's policy when you
buy a new home.
How much money do you owe? An easy way to measure your economic
well-being is to see if you owe more or less money than you did last
year. 3 points for reducing your total debt by 10% or more. 2 points for
reducing it by 5 to 10%. 1 point for reducing it by 1 to 5%. 0 points if
it remained the same. Minus 1 point if the amount you owe went up.
How is your debt structured? Generally borrowing to buy something that
will hold it's value (like a house) isn't as bad as borrowing for
something that will be gone long before the payments are (like a pizza).
3 points if you don't owe any money to anyone. 2 points if you only owe
money on your home. 1 point if you owe on your house and car. 0 points
if you owe on a credit card or personal loan. Minus 1 point if you owe
money to everyone in your office.
Did you add to your retirement savings last year? Each year brings you
that much closer to retirement. And, the magic of compounding means that
a dollar saved for retirement in your 20's is much more valuable than a
dollar saved in your 50's. So every year counts. 3 points if you saved
4% of your salary or more last year. 2 points if you saved 2 to 4% of
your salary. 1 point if you saved 1% of your salary. 0 points if you
didn't add anything to your retirement accounts. Minus two points if you
borrowed from your retirement plan last year.
Have you reviewed your investments in the last year? You don't need to
be a Wall Street wizard to know that today's investment climate changes
quickly. That means that you need to look at your investment position
regularly to see if adjustments are required. It's tempting to focus on
whether you made money since your last review. Yes, that's something
that you should check. But, the more important question is are you
positioned for the future? Do you need to make any changes now? 3 points
if you reviewed your investments at least once each quarter. 1 point if
you reviewed them at least once during the year. 0 points if your
account statements are stacked on your desk waiting for you to look at
them.
So how did you do? If you scored 15 or more you really have things under
control. You're probably only reading this because it's after-hours and
you can't call your broker or insurance agent at this time!
A score of 10 to 14 points indicate that you're trying, but still need a
little work to be a personal finance pro. If you scored between 5 and 9
points you probably need to pay more attention to your finances. And if
you scored less than 5 points make sure that your rich uncle has
included you in his will. You'll need the cash!
About the author
Gary Foreman is a former financial planner who currently edits
TheDollarStretcher.com
website and newsletters. You'll find thousands of time and money saving
articles.
|
|
