How Do I Give Myself an End-of-Year Financial Review?

Q: With 2020 drawing to a close, I’d love to give myself an end-of-year financial review before it goes.  Where do I begin?

A: Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement and update your accounts, funds and investments. Here’s all you need to know about this important end-of-year ritual.

Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress toward paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest?

If your debt needs some help, you have two primary options for how to proceed:

  • The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
  • The snowball method. Work your way through your debts, starting with the lowest-balance debt. Then, once it’s paid off, apply the payment that was previously committed to that debt to your new lowest debt. Repeat through the rest until all debts are paid off.

For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.

Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Have you forgotten to put money into savings each month?

Going forward, make it easy by automating your savings. Give us a call at 410-663-2500 ext 124 to set up an automatic monthly transfer from your checking account to your savings account. [You can also set this up through your online and/or mobile banking with us.] This way, you’ll never forget to put money into savings again.

Step 3: Review the progress you have (or haven’t) made on financial goals

Have you made measurable progress toward your financial goals in 2020?

Take a few minutes to review your past goals, taking note of your progress and determining how you can move toward achieving them.

Step 4: Review your retirement account(s) and investments

As you work through this crucial step, be sure to review the following variables:

  • Your employer’s matching contributions. Are you taking advantage of this free money, or leaving some of it on the table?
  • The maximum IRA contribution limits for 2021. You will likely need to make adjustments for the coming year. If you don’t have an IRA, open one now.
  • Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
  • Your stock/bond ratio and investing style. You may want to take more risks in 2021 or decide to play it safer this year.
  • Your portfolio’s balance. Does it need adjusting?

Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.

Include the following in your binder:

  • Medical information
  • Account information
  • Child care and pet care details
  • Online accounts and passwords
  • Insurance policy documentation and details
  • Investment accounts and details
  • A copy of your life insurance policy
  • A copy of your living will
  • A copy of your last will and testament

Step 6: Set new financial goals for 2021
As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals in the coming year.

A great way to turn dreams into reality is to set goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Here are some goals you may want to set for the coming year:

  • Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
  • Review the week’s spending with your partner each Friday night.
  • Pay off your largest credit card bill by 2022.
  • Start a vacation fund in February.
  • Cut out two subscriptions you don’t really use by mid-year.
  • Slash your weekly grocery bill by 10% before May.

If you need help with anything from developing a budget to reducing debt/improving credit, contact our HOPE Inside financial wellbeing coach. There is no cost to you.

Destinations Credit Union wishes you a financially healthy New Year!

Your Turn: Do you have any additional steps for your own end-of-year financial review? Share them with us in the comments.

Sources:
https://www.14news.com/2020/11/14/make-ends-meet-financial-year-review/
https://steppingstonestofi.com/end-of-year-financial-review/
https://moneyning.com/better-yourself/how-to-conduct-a-financial-year-in-review/

Against All Odds: J.K. Rowling

Photo of Author J.K. Rowling

She grew up in poverty and spent years struggling to get by as a single mom. She battled severe depression and her first book was soundly rejected by a dozen publishers.

And then she went on to become the wealthiest author of all time.

Welcome to the magical world of J.K. Rowling.

The early years

Joanne Rowling was born on July 31, 1965, in Yate, England, where she lived with her parents and sister, Dianne.

“As soon as I knew what writers were, I wanted to be one,” Rowling writes on her website. She wrote her first book at age 6 — and has been writing ever since.

Rowling’s childhood was far from idyllic. The family didn’t have much money and her mother’s 10-year battle with multiple sclerosis affected each of them in myriad ways.

The author studied French at Exeter University, where she claimed she did “no work whatsoever.”

After college, she worked as a researcher and secretary for human rights organization Amnesty International in London.

While riding a train from Manchester to London in 1990, the idea for the story of a young boy who doesn’t know he’s a wizard took root in Rowling’s mind. By the time the ride was over, Rowling had a basic outline for a seven-book series.

So goes the origin story of a legend.

Hard times

Rowling describes the day her mother died as the most traumatic event of her life. She was 25 years old at the time, and six months into writing the early drafts for the Harry Potter series.

After her mother’s passing, Rowling moved to northern Portugal, where she dated Jorge Arantes. She worked afternoons and evenings teaching English and devoted her mornings to writing Harry Potter and the Philosopher’s Stone.

In 1992, Rowling married Arantes and, in 1993, she gave birth to a daughter, Jessica Arantes. However, the couple separated four months after Jessica’s birth.

Following the split, Rowling relocated to Edinburgh, Scotland, to be nearer to her sister while experiencing the darkest time of her life. Desperately poor and relying on welfare to survive, the single mom battled severe depression that sometimes bordered on suicidal thoughts. She was jobless, penniless and she had a small girl depending on her for her every need.

“I was the biggest failure I knew,” Rowling said during a 2008 Harvard University commencement speech.

Throughout the five years following her mother’s death, Rowling continued creating the secret wizarding world of Harry Potter, further outlining the series while writing the first draft of the first book. She’d sit in cafes throughout the city, painstakingly writing her manuscript on small scraps of paper that she would later transfer to pages using a rickety typewriter. Finally, in 1995, the first book in the series was complete.

Harry Potter was ready for his grand debut. Not everyone was quite as ready, though.

Getting published

The muggles of the world had no idea that an entire society of spell-casting wizards inhabits the same planet as they do, but J.K. Rowling was ready to reveal all — if only someone would agree to publish her book!

Rowling submitted her manuscript to 12 different publishing houses. The publishers must have been under a confundus charm, as each one soundly rejected the manuscript, claiming it was far too long for a children’s book. Ironically, at 320 pages, it is the shortest book in the series, with the fifth and longest book measuring nearly three times its length.

Finally, Rowling commissioned the Christopher Little Literary Agents to find a publisher for the story of The Boy Who Lived. After several failed attempts, the series was accepted by Bloomsbury, a small publishing house in London. The publishers encouraged Rowling to use initials for a book geared toward young boys, and after adding a “K” for her paternal grandmother, Kathleen, Joanne (Jo to her friends) became J.K. Rowling.

On June 26, 1997, Harry Potter and the Philosopher’s Stone hit the bookstores — and it was an instant sensation. All 500 copies of the initial printing sold rapidly, and just three days after its release, American publishing house, Scholastic, paid $105,000 for the rights to print the book in the United States. Rowling celebrated by purchasing her own apartment.

On July 2, 1998, Bloomsbury published the second book in the series, with an initial print run in the U.K. of 10,000.

In October of the same year, Scholastic published the first book in the series with a slight name change, illustrations at the beginning of each chapter, and an initial print run of 50,000. To date, Harry Potter and the Sorcerer’s Stone has sold 120 million copies around the world.

Also in October 1998, Rowling signed a seven-figure deal with Warner Bros. to turn the books into movies. The chart-topping series ended in 2011, with total sales from the franchise grossing at $21 billion, making it the most profitable movie franchise of all time.

Rowling continued writing Harry Potter books with just one-year breaks between each release until her catapult to fame finally caught up with her after the release of her fourth book in July 2000. She needed a break.

“The pressure of it had become overwhelming,” she told The New Yorker in an interview. “I found it difficult to write, which had never happened to me before in my life.”

Rowling also explained that she hadn’t had time to process the level of her fame and wealth.

“I needed to stop and I needed to try to come to terms with what had happened to me,” she said.

During this break from writing, on Dec. 26, 2001, Rowling married anesthesiologist Neil Murray. The couple have two children.

In June 2003, she published Harry Potter and the Order of the Phoenix, the longest book in the series. The sixth book was released in July 2005, with a record-breaking 10.8 million copies sold in the U.S.

In 2004, Forbes reported that Rowling was the first person in the world to become a billionaire by writing books. She later dropped off the billionaire list after giving much of her fortune to charity.

Harry Potter casts his final spell

In 2007, Rowling finished the series with the fastest-selling book of all time: Harry Potter and the Deathly Hallows. The seven books have collectively sold more than 500 million copies around the world.

In 2010, Universal Studios opened The Wizarding World of Harry Potter, a theme park where guests can visit Hogsmeade, choose a magical wand and ride a roller coaster on a Hippogriff.

Rowling often speaks about how the hardships she endured in the early years of her life enabled her to create the wonderful world of Harry Potter.

“I couldn’t have written this book if I hadn’t had a few years where I’d been really as poor as it’s possible to go in the U.K. without being homeless,” Rowling said in 2012.

Elsewhere, Rowling said that she used her experience of depression to describe the despair and blackness the Dementors spread in Harry Potter’s world.

“It was entirely conscious,” she told the Times.  “And entirely from my own experience. Depression is the most unpleasant thing I have ever experienced.”

The author’s net worth stands at $92 million. The very best thing her wealth has given her, she writes, is the absence of worry. “I have not forgotten what it feels like to worry whether you’ll have enough money to pay the bills. Not to have to think about that anymore is the biggest luxury in the world.”

Rowling pays it forward with her remarkable philanthropy, giving special attention to charities that serve orphans.

The magic of Harry Potter lives on.

Do you have dreams but need help bringing them to fruition financially?
Destinations Credit Union can help with our HOPE Inside Financial Counseling – get your finances on track and get the help you need to realize your dreams.

Your Turn: What’s your favorite Harry Potter moment of all time? Best answer gets 10 points for Gryffindor!

 

Sources:
businessinsider.com
jkrowling.com
newyorker.com
insider.com
time.com
businessinsider.com
people.com

Financial Preparation For 2018

2018 is almost here. Are you ready?

Clock nearing midnight

New year clock on abstract background

Remember the Boy Scout motto: Be prepared! A brand-new year, always ripe with resolutions, is the perfect time to reassess your financial attitude, improve, and vow to do more.

“It’s a time of planning for going forward,” shares Sallie Krawcheck, co-founder of Ellevest. “We see a lot of people, often over the Christmas holiday, but certainly in the new year, taking stock of where they are on their personal finances and investments.”

Have you taken any steps to prepare for the financial realities of the coming year?

Here are some tips to get you started.

Tune your budget

It’s a great idea to begin the new year with a plan. A budget is just that-a plan that starts with the income you expect, along with your fixed expenses, such as rent or mortgage costs, homeowners association fees, insurance, utilities and transportation costs. The plan also incorporates your savings goals.

Then, the money remaining is designated for your other expenses. A realistic budget will help you set your financial goals and remind you to stick to them. These last few days in December, as the year draws to a close, is the perfect time to assess last year’s budget or to create a new one if you don’t yet have one in place.

Reviewing where you spent last year’s money will help you make better choices in 2018. If you did not save money for retirement, for example, this can be a new budget item.

While planning for the coming year, make sure to include a method for tracking your spending. You can do this on a spreadsheet or you can simply tag items in your financial account.

Even with a solid strategy in place, there will always be surprises along the way. Losing a job, a leaking roof or an illness can throw off your entire plan. Be sure to build an emergency fund into your budget.

Plan ahead to meet your goals

Next, consider how you will accomplish your goals. You’ll have short-term goals, such as purchasing a new car or home, as well as long-term goals, such as saving for retirement. Each set of goals requires a different kind of planning and saving.

Financial planner, Rachel Rabinovich, recommends setting up a separate savings account for each goal. This way, you can easily track your progress.

Experts suggest working backwards to determine how much you need to save for a specific goal. For instance, if you dream of taking an expensive vacation two years from now, determine the total cost of the vacation and then establish a reasonable time-frame and the amount you’ll need to save each month to reach that goal. Make sure the amount you plan on setting aside each month is doable, or you may just have to move your goal over by six months or more.

Spend mindfully

You can also make your financial future more secure by identifying the difference between your needs and wants. Needs are necessary for your survival, and include items like food and shelter. Wants are things that are not necessary but you would like-such as a luxury car or European vacation.

First, tend to your needs. Then, based on what’s left to work with, consider your wants. This might sound obvious, but for many of us, the line between wants and needs is often blurred. This can lead to awfully tight financial situations, even prompting us to “borrow from Peter to pay Paul.” By clearly differentiating between what you want and what you need, you can avoid this outcome in 2018.

Maximize retirement contributions

Retirement plan contributions can be a valuable source of savings, especially if you have the option of employer-matched funds. If you do, be sure to take advantage of them!

Also, check with your HR contact and your accountant to make sure you are contributing the optimal amount to your 401K and IRA. For the coming year, you can contribute $5,500 to a Roth or traditional IRA, or $6,500 if you are making “catch-up” contributions.

Check your flexible savings account (FSA)

If you have unspent money in your FSA, now is the time to use it. These pre-tax dollars often have to be spent before the end of the year. Do you need a new pair of eyeglasses? Are your teeth in desperate need of a cleaning or repair? This might be a good time to spend that money on self-care and other needs you’ve been pushing off. You don’t want to lose this money, so be sure to use it if you can.

Put the brakes on holiday spending

Avoid going overboard on your holiday spending. Think three times before you pull out your credit card. Going over budget now can mean spending the first few months of 2018 playing catch-up with your credit card bills. Spend less, and start the year off with a clean slate!

Your Turn: What are some of the things you’re doing to prepare for 2018? Share them with us in the comments!

SOURCES:
https://www.cnbc.com/2017/11/20/ceo-sallie-krawcheck-3-ways-to-get-your-finances-in-order-before-2018.html

https://money.usnews.com/money/personal-finance/saving-and-budgeting/articles/2017-12-11/5-steps-to-building-your-2018-budget 
https://www.investopedia.com/articles/personal-finance/111813/five-rules-improve-your-financial-health.asp 
https://www.forbes.com/sites/markavallone/2017/10/01/10-quick-year-end-financial-planning-tips/#205a7f9b3a59 
https://www.cnbc.com/2017/11/20/ceo-sallie-krawcheck-3-ways-to-get-your-finances-in-order-before-2018.html