Eat the Frog First

Don't forget the money. Amid the fitness and weight-loss goals you set for the New Year, make it a point to get a handle on your financial situation in 2011.  Because when it comes to finances, "getting by" can mean "getting left behind." 

Let's not lie to ourselves. Managing our own finances can often feel overwhelming. Debt, credit, mortgages, loans, insurance, retirement planning, college savings, "rainy day" money, 401(k) contributions, ROTH vs Traditional IRAs, investments, estate planning, budgeting...with the business of Life going on, who has time or energy to get a handle on all of it?

When I run seminars on money, I often pass out the following checklist of "the basics" to give the attendees a chance to evaluate where they might need to focus their attention.

Give yourself a point for each of the following you feel you have under control:

Financial Savvy Survey

General Finances

• I keep a budget
• I know how much my cost of living is rising (effects of inflation)
• I know the current value of my household's checking/savings account(s)
• I know my household's gross and net income
• I know the sources of my household's income (salary, rental property, dividends, pension, etc.)
• I know my home's current market value
• I know the value of my household's investments (stock, bonds, real estate, etc.)
• I know who my household's financial advisor(s) are
• I am familiar with the strategies my financial advisor(s) are using to manage my assets
• I know whether or not I can expect any inheritances, and about how much
• I know how much debt my household is currently carrying, and each debt's interest rate
• I have a plan to pay off my household's debt
• I know how long it will take my household to pay off its debt
• My household has a cash reserve equal to at least three months' worth of income
• I am saving for my loved ones' educational costs
• I regularly review the state of my assets and my financial condition
• I regularly review and adjust my household's financial plan/financial strategy

Retirement Planning

• I am saving for retirement
• I am taking possible changes to Social Security benefits into account I plan for retirement
• I have a solid estimate of the total level of assets I will need to reach by retirement to maintain my standard of living or, if I am already retired, I know how long my assets will last given my current withdrawal rate and rate of return on my assets
• My plan for retirement takes inflation into account
• My plan for retirement takes increasing medical costs into account
• I am familiar with IRAs, 401ks, and other tax-deferred retirement savings vehicles
• I understand how tax-deferred savings/investment plans affect my taxable income
• If my state of health or family history warrants it, I have purchased long-term care insurance or made other plans for my long-term care needs

Estate Planning

• I have a will and I review it with my estate attorney once every few years
• I have a living trust and I review it with my estate attorney once every few years
• I know how to make tax-free gifts to my loved ones
• I understand how my beneficiary choices and estate planning will affect my heirs
• I have shared the basics about my estate plan with my loved ones
• If I am married, I understand how a death of my spouse may effect my income/estate
• If my situation warrants it, I have arranged for life insurance coverage

Score

24+    I am financially savvy! I am well prepared for my financial future!
17-23 I am very financially aware, but need to do a little more work
10-16 I have made some good financial steps, but need to set some solid financial goals
  0-10 I have an urgent need to focus on my financial awareness

Even "the basics" covers a pretty long list!

Like most seemingly insurmountable big projects, understanding financial issues is really a matter of focus and priorities.

Don't let the complexity and scope of all the facets of your personal finances overwhelm you. For 2011, review the list above and decide:

1. What is my biggest financial concern, and
2. How soon do I want it resolved or achieved?

Pick that one item to focus on in the coming year and make a plan to get it shaped up.

My mother, a wise woman, and very smart with her money, always tells me: "Eat the frog first," meaning: tackle the issue you're most dreading first. Trust me. It's not going to be as bad as you think!