I Have My Financial Inventory, Now What?

Congratulations! You’ve built a complete inventory of your finances. Next, let’s walk through each section to identify how to grow your wealth. In this post, we’ll focus on creating a strong financial foundation.

Let's start with the assets you have. Address the questions below to determine if you should take immediate actions to strengthen your assets.

  • Emergency Fund: Do you enough cash to cover at least 3 months of bare-bones expenses (housing, food, utilities)?  If not, let’s add this to the top of your priority list.
  • Consolidation: Have you found assets that aren’t creating value? You might want to consolidate these. For example, did you find a small savings account or old savings bond that has come to maturity? If you consolidate into fewer banks and fewer accounts, manage your finances is even easier.

What about your liabilities? Debt can be overwhelming. Review the questions below and rank the debt you want to pay off. Determine what debt is first priority, and after that is paid off, know what comes next.

  • High-Interest Debt: What is your highest interest-rate debt? If it is student loan or credit-card debt, consider it as a potential #1 payoff priority. We’ll work together to make (or find) money to pay this debt off faster.
  • Stress-Creating Debt: Not all debt is created equal. Is there a debt that really stresses you out? This is often personal debt like a loan from a family member, or student loan debt that can be both large and impossible to discharge in bankruptcy. Identify your stress-creating debt and consider that as a payoff priority.
  • Tiny Debt: Do you have a debt that is much smaller than the others? Consider paying the tiny debt off as fast as possible, and then re-directing the payment amount towards your next highest priority debt.

How are you doing on insurance? Many of us are intimidated by insurance policies. However, the right insurance can play a critical role in reducing our risk and guarding our wealth. Explore the questions below to decide if you need to change your insurance coverage. (We'll talk even more about insurance in Step 5.)

  • Health Insurance: Do you have health insurance? If not, selecting and funding a plan should be at the top of your to-do list.
  • Confusing Insurance: Do you have a policy that you don’t fully understand? While there are many quality insurance products on the market, there are also expensive policies that provide rich commissions to the salespeople that recommend them. If you don’t understand it, call the policy provider and educate yourself to understand if the policy really works for you.
  • Life Insurance: Does your lifestyle depend on income from someone else? For example, are you partnered and you split the mortgage and bills with your significant other? Or, do you not work outside the home and depend on the income from someone else? If the answer is yes, consider a term life insurance policy to protect against future loss at a modest cost.

After completing your inventory, and reviewing the questions above - let me know what you’re tackling first. Create a very specific (prioritized) to-do list - I use Wunderlist - and give yourself deadlines. Each change you make strengthens your financial foundation. You’ve got this!