5 Questions to Ask Before Taking on More Debt

The term ‘debt’ generally has a negative connotation. While being in too much debt or the wrong kind of debt can be risky, sometimes debt makes sense. If you are considering taking on more debt, sit down and answer the questions below first to make sure the new debt won’t get in the way of your long-term goals.

How much debt do I currently have?
When thinking about debt, it’s important to first analyze your current financial landscape. Be sure to review everything: credit cards, lines of credit, mortgages, loans and possibly IOU’s to family or friends. Once you have totaled all monthly recurring debt payments, divide that number by your gross monthly income to find your debt to income ratio (DTI). The lower the number, the better. Talk with your financial planner about your ratio and ask for his/her recommendation on whether you should consider taking on more debt. Continue reading

10 Ways to Keep Your Finances Healthy in 2016

The New Year is here and it’s time to start thinking about how you’re going to keep your finances healthy in 2016. Looking at your finances now gives you time to readjust and put your finances on a healthy trajectory.

1. Review Everything
As you start out the New Year, go through your finances with a fine tooth comb. Leave no account unturned. It may be helpful to create a password protected spreadsheet. Make notes on the use of the account, the institution where it is held, and the interest rate (if applicable). Check bank accounts, credit cards, retirement accounts, and mortgages.

2. Plan for Emergencies
We all know emergencies happen, but are you financially prepared? From something small, such as a new appliance, to something larger, such as an unexpected medical procedure — it’s important to be prepared. Plan for the unexpected expenses and set aside funds accordingly.

3. Reevaluate Your Budget
You may have created a budget a year ago, or even 5 years ago, but when was the last time you updated it or made adjustments? Have your monthly expenses changed? Has your income increased? Do you need to increase your savings rate? Take a look at our 10 Beneficial Budgeting Tips for ideas on making and following an effective budget.

4. Invest
Consider increasing your overall investment contributions. Before making any investment decisions, consider meeting with your Certified Financial Planner™.

5. Consolidate Your Accounts
Do you have multiple 401(k) plans from old employers or IRA accounts you’ve been meaning to consolidate? Start the New Year off right by getting your accounts rolled into one. Your financial planner can help you decide on the best account type for your goals. We are happy to help you find and consolidate all of those old accounts. Your retirement funds should be easier to track if they’re in one place.

6. Check Your Liquidity Ratio
To determine your liquidity ratio, divide the total of all your cash assets (checking accounts, savings, non-retirement stocks and bonds) by your total monthly expenses. This will show you how long you could maintain your current lifestyle if you were to lose your income. It is generally recommended you have 3-6 months of money saved.

7. Evaluate Your Goals
If your goal is to retire by age 60 or upgrade your house in the next couple of years, use the New Year to evaluate where you are in reaching your goal. Plan on checking in on the status of your short-term goals monthly and long-term goals about once or twice a year to help ensure you stay on track. If you haven’t set financial goals yet, start the New Year with financial goal setting. Think about your goals for 2016 as well as the next 5, 10, 20 years and beyond.

8. Check in on Your Credit
2016 is the perfect time to take a look at your credit score, if this is not something you do regularly. Checking your score can help you detect (and dispute) errors, stop potential identity theft and save money. Also be sure to thoroughly review your 3 credit reports, which will tell you what you are doing well and what you could improve on. If your credit isn’t where you want it to be, you can resolve to take steps throughout the New Year to improve your score.

9. Protect Your Family – and Assets
Last year in the 2015 Financial Check-Up post, Julie Fletcher, CFP® said, “Be sure not to leave any gaps in your insurance coverage that would leave you vulnerable. Potential gaps include premature death, disability, health, liability, business, car and homeowner’s insurance. Having the proper insurance in place is essential for your protection.” What was true in 2015 is true in 2016. Check your insurance coverage to keep you and your family protected.

10. Visit a Financial Planner
If you find yourself feeling lost, talk to your Certified Financial Planner™. His or her job is to work with you to look at your goals, financial status, and discuss what is best for you and your family. We would love to meet with you to see how we can work together to help you plan, invest and succeed. Contact us for a complimentary consultation.

The New Year provides a great opportunity to check in on your finances and get them on the right path. Following the advice above will give you a good start to keeping your finances healthy in 2016 and beyond.

Where Credit Is Due: Understanding and Maintaining Your FICO Credit Score

Digital Online Credit Score Finance Rating Record ConceptWe all know good credit is a good thing. But it may surprise you to know how critical your credit score is to your future. If you’re thinking of borrowing money for a car, home or other major purchase, your credit score will determine if a lender is able to give you a loan, and how much interest you’ll pay. Auto insurance rates can also be affected by your credit score, and some employers even check credit scores before hiring someone to evaluate reliability. Below is more information to help you understand your credit score and to keep it on the up and up. (source)

What Exactly Is a Credit Score?
Fair Isaac and Co. developed software in the 1980s to help lenders identify credit risks. Since then, their initials (FICO) have been associated with a person’s credit score. Your credit score is a number derived from your credit history. The three credit bureaus are Equifax, TransUnion and Experian, but keep in mind that you will likely receive varying credit scores from each credit bureau.

While your credit score is determined by your credit report, they aren’t the same thing. The biggest difference between the two is your score gives certain parts of your history more weight than others. A credit score breakdown looks like this:

  • Payment History: 35%
  •  Total Amounts Owed: 30%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Type of Credit Currently in Use: 10%

Continue reading

Identity Theft: What You Need to Know to Protect Yourself

Identity theft has been in the news often over the past few years. So often, in fact, it is easy to think of it as a problem that only happens to other people. The unfortunate reality is identity theft continues to hurt thousands of Americans every year, ruining credit scores, jeopardizing careers and creating nightmares for victims trying to put their lives back on track.(source) Identity thieves try to steal information in many ways. Hacking, phishing or stealing smartphones, laptops and mail are all ways a thief can access your personal data.

Guard Your Personal Information
The first step to protecting yourself from becoming the next victim is guarding that personal information. Identity thieves can get virtually anyone’s address, birthdate and name easily. The thing that can harm you the most if it falls into the wrong hands is your Social Security number. Keep your Social Security card somewhere secure like a safe; do not carry it with you in your wallet or purse. Be extremely wary of any website that asks for your Social Security number. (source) Continue reading