Friday, January 24, 2014

14 Ways I am Changing My Financial Life in 2014

I think accountability is a good thing. In fact, I wrote about it last year here: Accountability: The More Personal and Public the Better. With that post I disclosed some specific things I was going to do in 2013 to improve my health and fitness, and it helped me accomplish my goals. Knowing that I had detailed my plan for improved health on the internet for the world to see (well, at least those who visit my blog) helped me stay motivated to do what I said I would do. My wife thinks I'm a little crazy, but it works for me.

In the spirit of public accountability, I am going to disclose the priorities and goals I have in place that will help me develop better personal finance habits in 2014. Sadly, I've neglected this area of my life a little; it's time to change that. I am not dropping what I worked so hard to achieve in 2013. Rather, I will maintain the good habits of health and fitness I acquired last year while developing new habits in the area of financial health this year.

The List
Hopefully this list will validate what you are already doing, or it may give you some ideas of where you might want to improve. It may motivate you to keep doing what you're doing or consider making some changes. This list is just a summary of each priority/goal. I will write future blog posts that get into the details of each, including my experiences with implementing each of them.

[Author's Note: As I write the future blog posts, I will link each post to to this list]

1. Clarify priorities to render financial decision-making automatic, not a daily debate. In the past I remember feeling paralyzed by certain decisions. Should I put every extra dollar I have into paying off my house before I start to save for retirement? Where does saving for college for the kids fit in? When is it okay to pull money from our emergency fund? I've wrestled with all of these questions and more, and that wrestle has resulted in a clear, concise set of priorities, in specific order that I use as a guide when deciding where to put every dollar that comes into my bank account.

2. Stop using debt in all shapes, sizes, and forms. The float on your credit card is debt! Borrowing money from yourself (through your 401k) is debt. Whatever its form, I've decided: NO MORE. I've already written some of my experience with this here: I'm Turning My Credit Cards in Guitar Picks.

3. Pay off all debt, except for the house, and get one month ahead. Much more to come on this subject. January has been a great month, and I can't wait to detail how I've pulled it off.

4. Build up the emergency fund. The "experts" seem to recommend between 3 and 12 months worth of living expenses. This should not be an arbitrary number. I've come up with my own philosophy on determining how much I need and the savings vehicle(s) where I should keep it.

5. Switch to an online-only bank. Enough with the local credit union and their behind-the-times technology. I want to bank where I don't have to go into a branch or office. That is the way of the future. And I'm earning better interest, too. In a future post I'll detail how I decided which online bank and how it has gone so far.

6. Overhaul our family budget with new budgeting softwareMy attempts in the past to create and stick to a budget never got the traction I wanted, and I always struggled to budget for the infrequent and non-recurring expenses. I am on a mission to change that. Funny how I have successfully done that for dozens of large business, but never applied it to my own household finances. And I found the best software of all for budgeting personal fiances. I will tell you about it in an upcoming post!

7. Update my Personal Financial Statement (PFS) and review trends. This is one of the two main methods to determine your overall financial health. It is important to track and hold yourself accountable to improving it every year. I've gone back as far as 2005 and have some interesting trends to report along with some lofty goals to shoot for this year.

8. Pay more attention to my 401k investments. I used to help people invest their money. Yet I've spent less than 5 total minutes selecting and managing my 401(k) account. I know with a little more TLC I can improve performance and the ultimate outcome.

9. Retirement Savings. Is a Roth or Traditional IRA better? What is the best way to invest the money? How do I make sure I will have enough to enjoy a comfortable retirement? I have found some solutions here that I am excited to share.

10. Set-up automatic investment for kids. First I had to have a serious conversation with my wife about what, if any, obligation we felt toward helping our kids with college, missions, etc. Then I had to decide what to do about it. We have agreed on an "introductory" plan we are going to try out for a while, then evaluate from there.

11. Set-up savings for planned and unplanned major purchases. I am a planner. My wife is more reactive. We make a great team because of this difference and our other differences, primarily because the middle-ground we find seems to create the best results for both of us. However, I have fallen too much to the "reactive" side of the spectrum. It's time to plan and save more for purchases we know are in our future.

Quick Author's Note: Just so you know, my wife is brilliant. My first draft of this list had a total of 17 ways I am changing my life in 2014. She took one look and said: "It should be 14 not 17 ways in 2014." So I merged a few into others and now it just sounds way better!

12. Review food and commodities storage and bring it up-to-date. Almost 10-years ago I put some money and time into building a storage of food and commodities that we could call on in an emergency. At one point we had enough to last an entire year. As we've used some of it and as our family has grown, it is time to take inventory and get it back in shape.

13. Review, tweak, and renew all insurance programs and legal documents. How much and what kind of life insurance? High deductible or traditional health insurance? Do I have enough disability coverage? I am in the process of a comprehensive review of all insurance as well as my last will and testament, living will (with health care agent appointment), and power of attorney. I hope to share much more on this topic soon.

14. Taxes. I am getting a big refund this year. #FAIL. Getting a refund means I did not plan well for the 2013 tax year and let the government borrow my money. I have found some great tools to help correct this, and I think I am also going to try and file my own tax return this year. I am also a big proponent for the tax savings available to those with self-employment income. Even if you have a full-time job from which you receive a w-2, a little self-employment income on the side can save a LOT. Much more to come on that subject.

What I Learned...still to come
As I mentioned above, I plan to write much more about each of these items from the perspective of my personal experience and journey. Let me know if you have any thoughts or comments. Thanks for reading!