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September 15th, 2020

Working from Home? 5 Ways to Use this Time to Improve your Finances.

Working from home is the perfect excuse to bolster your personal balance sheet, and make sure your finances are in order.

There are few bright sides to the current state of the economy. However, for most people this “new normal” means working from the comfort of their home. With no commute and a lessened morning routine, you may find yourself with some extra time on your hands. Instead of continuing to binge that new Netflix series, use this spare time to analyze your finances and prep your long-term plans.

The first step of your financial check-up is to update your personal balance sheet.  Once figuring out the value of all assets and liabilities, you can get a quick gauge of your net worth. Simply subtract your liabilities (mortgage, credit cards, student loans, personal loans, etc) from your assets (401K, IRA, brokerage accounts, savings, cars, homes, etc).  Better yet, this is a good metric to track over time.

Does this number seem to be moving in an upward direction?

Keep it that way.

Moving in the negative direction?

Don’t panic– but could be a sign you need to start working with a Certified Financial Planner™.

Determine your debt-to-income ratio by dividing your debt payments over your monthly income. This number will tell you if your debts are being managed correctly and if your budget is effective. Higher percentages are signs of unmanageable debt, so strive to keep this number under 35%. This is a significant factor weighing on your credit score and especially when applying for a mortgage.

Next, take an honest look at your living situation. Are you living in a home you can afford or did you bite off more than you can chew with your mortgage or rent? Your housing expenses should take up 20-25% of your income. If your number is above this, consider alternative options such as downsizing or getting a roommate.

Finally, consider if your investing habits align with your financial goals. When making investments, do they align with your risk tolerance?  Are the funds liquid enough to be accessible when you need them? Are you making the investments in the most efficient account type for that investment?  Think asset allocation.

You have your numbers and you have analyzed where your finances are at – what now?

Time to factor in your personal financial goals and create a plan for attaining them.  This is when hiring a Certified Financial Planner™ to create a comprehensive financial plan for you can drive significant growth in your overall financial health.  From asset location to determining the appropriate investment strategy for each goal, a Certified Financial Planner™ will become an extremely valuable resource for you. 

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