As the end of the year approaches, things can get busy and you can be stretched a little thin. So a little self-care, enjoying a cup of tea cozy in bed, slipping into a warm, or hot bubble bath listening to your favorite playlist, or just sitting and soaking in the quiet, is well worth your time. However, what about a little “financial self-care”? It is just as important and like its cousin, can be well worth your time.
What is Financial Self-Care?
Financial Self-care are things you do to promote, improve or maintain your personal financial wellness. Things you do to stay financially sound. These things don’t have to be hard or complex, most in fact, are quite simple and most importantly…FREE. These actions will take a little of your time, but usually only about 30-minutes. You can always take longer, depending on what you are doing, but limiting yourself to half an hour is a good starting point.
There are many types of financial self-care, but listed four to get you started.
Review Your Credit Report: This is not only easy but FREE! It is also important to check your credit report regularly for errors and/or fraud. We want to catch both early and hopefully, before causing damage to your credit. If you are on Being Broke Isn’t Cute’s email list, or a following us on Facebook, you will get reminders every four months to check your credit report at one of the three major bureaus. If you aren’t, get on the list by clicking this link.
Review Your Beneficiaries: Here’s another important “freebie”, check the beneficiaries on all your insurance and retirement accounts. Life changes. People get married, divorced, have children, and lose family as well. Make sure your various accounts, including bank accounts, are updated and reflect your wishes.
Review Your Budget: Okay, this one we should be doing regularly anyway, but at least once per quarter, we need to go through our budget and clean it up. Review your memberships, subscriptions and make adjustments for increases, or decreases, in payment amounts. Also review anything automatically paid via your bank account or credit card. Those are easily overlooked and forgotten. Review your expenses, remove items you no longer have use for and if you’ve added new expenses, update your budget to include them.
Review Your Ratios: There are lots of financial ratios, but only two I will discuss for you to check at least quarterly.
Debt-to-Income Ratio: Annual Debt Repayments / Gross Income x 100
Answers the question, is my total debt burden to high? Compares the amount spent on debt repayment to your gross income and should be 36% or less. This ratio is based on ANNUAL totals, so it would be the amount you pay on debt for the year compared to your yearly income. You can also calculate this formula using your monthly totals as well.
Liquidity Ratio: Monetary Assets / Monthly Expenses
Answers the question, do I have enough liquidity to pay for emergencies? The ratio gives you the number of months of living expenses you could pay in case of an emergency with NO INCOME. The traditional goal has been 3 to 6 months, but you should set your personal goal at what makes you feel comfortable. By the way, “Monetary Assets” is just a financial way of saying cash and items that can be easily converted into cash, with little or no loss in value, things like checking and savings accounts.
You can take the above list and do them all in one setting or dedicate one session for each, whatever works best for your situation. My hope is that when you get started you will find additional financial self-care actions. Remember, don’t make it a chore, KEEP IT SIMPLE and enjoyable. Then after your session, enjoy a little personal self-care as a reward.
Until Next Time♥…
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