Isn't That Rich Podcast

We’re about to talk about something super important – getting our financial lives together. We know, it sounds a bit boring-ish, but trust us, it's crucial, and it's not as mundane as it sounds. Last week, we chatted about gathering all the necessary documents to tackle our financial future. Now, we're diving even deeper into the nitty-gritty – our bank accounts, investments, insurance policies, and more. Knowing where we stand financially is like unlocking the secret to achieving our money goals. And guess what? It all starts with something called a financial inventory.

So, what's this financial inventory, you ask? Well, it's like taking a snapshot of your money life. It involves listing all your assets and subtracting your liabilities. Assets? Liabilities? Don't worry, it's just a fancy way of saying what you own versus what you owe. Think of your home, car, bank accounts – those are assets. Liabilities? Well, that's your mortgage, student loans, credit card debt – the stuff you owe.

Understanding Net Worth:

So, net worth? Did you know everyone has a net worth, no matter age or income level? Net worth is the sum of all your assets minus the sum of all your liabilities. It's like the superhero of your financial story. Assets include your home, car, bank accounts, jewelry, and more. Taking the time to itemize these assets is the first step in determining your net worth. We recommend using tools like EverPlans, an online vault for your digital archive, to securely store essential documents and information. We think it’s a great tool to use to keep your financial stuff safe and secure. It's like your online vault for all things important. Your digital sidekick to keep everything safe. 

Keys to Financial Inventory Planning:

Make a Monthly Appointment with Yourself: Schedule dedicated time every month for financial inventory planning. Imagine it's a date with yourself, but a serious one, where you look over all your financial items we’ll discuss today. Block out time for this financial gig and get it on your calendar. Don’t let anything come up that makes you reschedule. This time is an investment in future-you. This process may take time, but it's a crucial investment in your financial well-being.

Documenting Assets and Liabilities: Gather all your relevant documents, such as insurance policies, investment statements, and mortgage details. Create a comprehensive financial inventory planner to organize this information. Think of it as your financial scrapbook where you take it out and look at it every month to see how far you’ve come. In fact, we’ve created one for you to print out and use! Our tip is to use a pencil so you can make changes and updates as needed.

What do you know about your finances?

Here’s a little quiz to see how well you know your own financial situation. It’s a good place to start during your first financial time block and it will help you determine where you need to start digging deeper. If you answer false to any of the questions, simply use your monthly time block to find the answer.

Financial Knowledge Quiz:

• Question 1: Do you know the current value of your home, including the size of the mortgage and the amount of equity you've built in your home? T or F
• Question 2: Do you know the length of your mortgage payment schedule and how much extra it would cost each month to pay down the mortgage in half the time? T or F
• Question 3: Do you know how much life insurance you carry (or your spouse if applicable), the cash value in the policy, and the rate of return your cash value is earning? T or F
• Question 4: Can you name the details, including the amount of coverage cost, monthly or yearly payment of all other insurance policies carried by yourself or your spouse? This includes health, disability, term life, and more. T or F
• Question 5: Have you reviewed your life insurance policy in the past twelve to 24 months to see if the price you are paying for it is still competitive in today's marketplace? T or F
• Question 6: Do you know what kind of homeowner’s coverage you have and what the deductibles are (if you own a home)? If you rent, do you know the amount of renters' insurance you have and what its deductibles are? T or F
• Question 7: Do you have an umbrella policy to protect your family's nest egg from lawsuits, including liability coverage? T or F
• Question 8: Have you attempted to protect your family's nest egg from lawsuits by carrying an umbrella policy that includes liability coverage? T or F
• Question 9: Have you prepared your own tax return this year or reviewed your tax situation with the person who prepared your return? T or F
• Question 10: Do you know the location and amounts of all your or your family's investments, including cash in savings or money market accounts, CDs or savings bonds, stocks and bonds, mutual funds, 529 college savings plans, real estate investments, and more? T or F
• Question 11: If you or your family owns a business, do you know the current valuation of the business, including how much debt it currently carries and the value of its liquid assets? T or F
• Question 12: Do you know the value, location, and performance of all your retirement accounts and those of your spouse (if applicable), including IRAs, Sep IRAs, solo 401(k)s, and company pension plans? T or F
• Question 13: Do you know if you or your spouse is making the maximum allowable contributions to your retirement plan at work, whether your employer is making matching contributions, and what the vesting schedule is? T or F
• Question 14: Do you know how much money you and your spouse (if applicable) will be getting from Social Security and what your and your spouse's pension benefits will be? T or F
• Question 15: Do you know whether your and your spouse's income is protected should you become disabled because you own disability insurance? Do you know the exact coverage, when the benefits would start, and whether the benefits would be taxable? T or F

Make the Most of your Retirement Planning:

• Maximizing Contributions: Ensure you are making the maximum allowable contributions to your retirement plan at work, especially if your employer is throwing in some cash too. This is part of your compensation package, and you should take full advantage of it! If not, you’re leaving money on the table that should be in your pocket.
• Vesting Schedule: Understand the vesting schedule of your employer's retirement plan to know when their matched contributions become fully yours. Not all employers let the money they contribute to your retirement plan go without some strings attached. They may require you to stick around for a certain amount of time before it’s truly yours. Make sure you read the fine print.

Social Security and Pension Benefits:

Be sure to regularly check your Social Security benefits on the official website (www.ssa.gov) to understand your future income. Know the value of pension benefits for you and your spouse. Most likely it won’t be enough to live the same quality of life you have with your current or future income. Be sure you check it!

Disability Insurance:

Consider disability insurance to protect yourself and your family in case of disability. Understand the coverage, when benefits start, and whether they are taxable. Disability insurance is often overlooked but can provide crucial financial support in challenging times. Think of it as your secret weapon against the unexpected.

Taking control of your finances requires proactive planning and regular assessments. By completing the financial inventory planner provided here, you'll have a comprehensive view of your financial landscape. Remember, this isn't a one-time gig – it's a journey. Stay in the know, plan like a boss, and watch those financial goals turn into reality. Your future self will thank you!