Year End Financial Checkup

Before you become too friendly with the nearest bowl of eggnog, give your finances a quick year end checkup. That way, you can roll into the new year hungover, perhaps, but with some idea of where you are financially and where you want to go. Admittedly, money issues bring less cheer than the bubbly stuff that makes the cork pop. Ignoring one's finances, though, won't lead to wealth.

A lot of year end financial advice focuses on tax planning or prognostications for next year. Like many things, though, a solid foundation in financial basics is more important than doing some transactions that invite an IRS audit or believing in the latest self-appointed soothsayer. Get the basics right and other things become easier.

Calculate your net worth. This is the where sound financial planning begins. If you don't know where you stand, you can't tell if you're making progress (or losing ground). If things are going well, you can give yourself a pat on the back. If not, save more and perhaps change what you're doing. Calculate your net worth every three months. For more, see http://blogger.uncleleosden.com/2007/04/secret-to-building-wealth.html.

Ensure adequate cash reserves. Make sure you have at least six months worth of living expenses set aside in an emergency cash fund that you never tap except during a crisis. Better yet, considering today's continuing albeit not-officially-recognized recession, have nine or twelve months of living expenses set aside. Unemployment remains a serious problem. Even though high ranking government officials are quick to tout even a tiny smidgen of improvement in employment levels, lots of people are still being laid off. Thrifty squirrels are the ones that survive winter.

Review portfolio diversification. Your portfolio's asset allocation may have changed as a result of market shifts. Most recently, bonds have been falling (contrary to every effort of the Federal Reserve to push them higher), while stocks have been rising. Consider whether you should adjust your allocations.

You may have different asset allocations for different pools of assets. The way you diversify a college fund for your kid(s) could be different from the ideal asset allocation for retirement savings. Keep these differences in mind.

Go over your benefits. Make sure you understand where you stand with Social Security and, if you have a pension, with your pension benefits. Maybe you don't believe either will be around by the time you retire. Well, people thought the same thing 30 and 40 years ago, and they're now retiring with Social Security and, sometimes, pension benefits. Figure out how to maximize your benefits. Then, maximize them as much as possible.

Review privacy. The Internet, by all indications, is becoming less private by the day. In an implicit but sharp rebuke to the private sector for its failure to display even a modicum of propriety, U.S. government regulators are now talking about setting federal standards for online privacy. Think about limiting your use of the Internet for financial matters (this includes banking, stock trading, online shopping and other online use of credit cards, debit cards, bank account numbers, and other financial transactions). The less often you do financial transactions on the Internet, the fewer opportunities you give bad guys to steal your money and/or identity. The Internet is unquestionably a convenience, but being robbed by cybercrooks can be highly inconvenient. If you must do transactions online, use the best security measures available.

A report in this weekend's Wall Street Journal (P. C1) indicates that smart phones (like the iPhone and Android) may be significantly less secure than computers. Apparently, some apps may sneak off with your name and other highly personal information without telling you or getting your permission. Avoid doing financial transactions on a smart phone, at least until security is greatly improved. If you must do financial transactions on your smart phone, check account balances and activity often. This means at least weekly and perhaps even daily for your bank accounts, credit card accounts and whatever accounts you use through your smart phone.

A cyberthief can make off with savings you took years to accumulate. Protect yourself.

Think about saving more. One of the best protections you have against an uncertain future is a nice, warm, fuzzy and large pool of savings. The more you save, the sooner you'll be able to retire and the nicer your retirement lifestyle will be. See http://blogger.uncleleosden.com/2009/07/simplest-financial-plan-of-all.html and http://blogger.uncleleosden.com/2009/11/techniques-for-retirement-saving.html.