Sometimes life can throw you a curveball, or two. If you’re in need of a financial reset, start by getting organized with this checklist.
Gather up a list of all of your assets and liabilities. Assets are things that you own, which grow in value, such as a home, an investment, a savings account, a pension or a business. Liabilities are debts such as a mortgage, car loan, line of credit, a credit card balance or money owed to friends and family. List out the total value of each asset and liability, then subtract the total amount of liabilities from your assets to determine your current net worth. Hint, your liabilities are the total balance of a particular debt, and not the monthly payment. You can use our handy net worth calculator to keep track of it all.
Understand your monthly bills and payments. Bills and payments are different from liabilities because you need to pay them monthly, and sometimes bi-weekly. These can be regular fixed amounts, like rent, or they can vary depending on how much you use a service, such as water usage. Deep dive into your bills and payments and list each, with the amount and the time of month that it’s due. If you’re not sure of the exact amount, guess it for now, then track the actuals this month, then go back to this list and refine. Some of our clients like to do this exercise using our budget template.
Prepare a preliminary monthly budget. Using the information from your monthly bills and payments, prepare a monthly budget. This should reflect all the income and expenses running through your bank account every month. For now, while you’re resetting, try not to make any major changes here until you’ve spoken to a financial advisor or money coach, who will help you target the right changes. The main takeaway with budgeting is that you want your budget to balance. If you are overspending you run the risk of going into debt and there are only two solutions; cut back or make more money.
Pull out insurance policies. Insurance protects you in the event of something extremely unlikely like death, disability, a break-in, a car accident or a critical illness. Many policies are unfortunately quite tough to read and digest. But, you need to understand what you’re covered for. If you’re not sure whether you have enough insurance, or if it’s the right kind, seek the advice of an insurance professional. We recommend you get a referral from a friend or family member.
Dig up mortgage papers and lease agreements for your home. Mortgages and leases renew at various times and you’ll want to be prepared to either renegotiate, or in worse cases, to move. Read through these documents carefully to understand your obligations and those of the bank or landlord. Not sure how to digest this information? Phone the mortgage lender or lease provider to discuss the details.
Read through any car financing or lease arrangements. Similar to your home, there are documents related to your vehicle. Understand how much you owe, when the terms of the financing, or lease arrangement, are up, whether there are obligations for you to payout any balances at the end of the term, and so on.
Review employment contracts. Do you know the conditions of your employment, such as the renewal term of a contract or your benefits, such as your pension or medical coverage? Review this information thoroughly so that you’re prepared for any changes you may need to make with your employer.
Speak to your advisors regularly until you’re back on your feet. Whether it’s a financial advisor, lawyer, doctor or insurance advisor, make sure you’re meeting with them regularly to understand what’s coming, such as a major tax bill or an insurance payout. Over-communication will not hurt you, but not being informed will. If you don’t like who is amongst your advisors, change it up by getting a trusted referral.
Take care of yourself. We can’t stress enough how important it is to sleep and eat well, and to surround yourself with good people, while you’re resetting. If personal time to be well is non-existent at the moment, you need to do something about that quickly as it will shore up the strong mental health you’ll need to get through the tough times.
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