It’s hard to believe we’re approaching the middle of the year already. It’s easy to make New Year’s resolutions, but far more difficult to stick to them. Financial goals are a common resolution, but five months after making them, it’s not uncommon for them to be on the back burner — or gone altogether.
Getting your finances in order should be a top goal for anyone — but especially for real estate investors. You never know when the next perfect property is going to pop up. Being able to finance it without scrambling is priceless.
Let’s check in on your financial resolutions and your financial situation to see if there are places to improve. Here are 8 things to get you started.
A Quick & Easy 8-Point Checklist to Evaluate Your Mid-Year Financial Situation
Revisit your budget.
Did you create a budget this year? How well are you following it? Creating a budget that is too restrictive is a top way to completely fail at following it. And what’s the point of making a budget if you can’t stick to it? Re-evaluate your categories, and make sure you have allowed for the correct amount of spending in each one. Adjust as necessary to help keep you on track while still meeting your spending goals.
Review those credit cards.
CapitalOne has a great tagline for their commercials — What’s in YOUR wallet?
Do you know what’s in your wallet?
Open it up, and take a good hard look at the cards you see. Do you use them all? Do you NEED them all? I love to play the balance-transfer game, where I take a credit card balance and transfer it to another card that has an introductory rate of 0% interest, typically for 6 months. As the 6 months gets closer, I find another card and do it all over again. Actually, I used to do this far more often. Credit card companies used to offer 0% transfer fees on top of 0% interest rates, but those offers are all but gone now.
I also like to open up new credit cards for the bonus offers — typically high amounts of airline miles. The deals are pretty much the same across the board — open the card and spend X over the course of X months. I’ve opened a LOT of these cards for the bonus points, but on one occasion, we didn’t spend the requisite amount before the promo period ended — not because we weren’t spending money but because we lost track of which card needed to have more money put on it.
It’s really easy to lose track of how many cards you have opened up when you’re playing these games — especially if you’re in the middle of a remodel. (Ask me how I know…)
Many times, these cards will have an annual fee that is waived for the first year. Are you paying annual fees for cards you don’t use?
Both Home Depot and Lowe’s frequently run “no interest for X months” promotions. Spend a minimum amount of money, and get 0% interest for 6, 12, 18 or 24 months — depending on how much you initially spend. I’ve used this program countless times, and it’s great as long as you pay the entire balance off before the promotional period ends.
If you DON’T pay it off before the end of the promo period, you will owe interest on the entire purchase since day one — not just on the remaining balance. Don’t get caught by surprise on this one — it can cost you HUGE!
Google has an awesome calendar that you can use to help you keep track of everything. Enter the date you need to cancel a particular card by to avoid the annual fee charge. Note the promo period end date to make sure you pay off the balance before interest is due. Mark the date the promo period ends to make sure you meet your spending minimums.
Reevaluate your mortgage.
Are you paying PMI on your mortgage? What is the state of your local market? If values have gone up considerably, look at refinancing your loan to get rid of PMI. PMI or Private Mortgage Insurance is for loans with less than 20% equity. FHA loans with case numbers issued June 3, 2013 or later will have PMI permanently part of their loan. The old rules dictated PMI be removed upon request at 20% equity or automatically at 22%, and those still apply to conventional loans.
If your FHA loan came with PMI attached, contact your lender and run the numbers to make sure a new loan — and all the costs associated with it — make sense.
Reassess your car insurance.
Insurance companies offer the same basic services — and although there is an elevated level of customer service with a brand-name company, the actual policies are very similar. The prices charged for those policies, however, can be vastly different.
I just requested quotes from several different companies as my policy was nearing renewal. It turns out that I had far too much coverage for what I needed and was paying too much for that coverage on top of that! My new rate is saving me $400 a year.
Home insurance, too.
Just like car insurance, there are endless options when it comes to insuring your home. Many companies will give you a discount called a multi-line discount, meaning the more items you insure through them — home, auto, rental properties, etc. — the lower you’ll pay for each policy. Make sure to get a quote for everything you’ll need insurance for. Got a boat, motorcycle or RV? Add those on, too.
Scrutinize your credit report.
You are entitled to one free credit report each year. The three major reporting agencies are required under the Fair Credit Reporting Act to provide you with one copy of their information each year. The three agencies have gotten together and created a website to meet this requirement called annualcreditreport.com.
Have you requested yours this year yet?
There are two ways to do this. Either grab a copy of each one all at the same time or space them out four months apart to more regularly monitor what’s in your report.
Related: Financial Freedom: 14 Steps to Stop Relying on Your 9-5 Job’s Income
The three companies will have different but similar items, depending on the company who issued you the credit. Mortgages are reported to all three companies, as are large credit cards like Visa. Smaller cards like store cards may only be reported to one agency, but there’s not a huge difference between the three reports.
Remember that Google Calendar tip from the credit card section above? That comes into play here, too. Get a copy of your report and mark your calendar so you can get a copy again in a year. Make reminders to get a copy of the remaining reports in four and eight months if you choose to go that route, too.
Review with your spouse.
Money is the #1 thing couples fight about. Many of those fights could be avoided if couples would just TALK about money. But money and finance are the topics we tend to discuss LEAST.
Review your goals for this year with your spouse. Make sure they are on board with your plans — it’ll go so much more smoothly if they are.
Carve out a block of time where there are no children or any other distractions, and sit down with your spouse to talk about where you are now, where you are going, and how you plan to get there. Really listen to what they have to say, too. People are more open to change — especially drastic change — if they have had some say in the program.
Calculate your net worth.
Basically, your net worth is the total of your assets, minus the total of your debts. An asset is anything you own that has monetary value. This includes your vehicles, real property, bank accounts, and retirement and investment accounts.
A debt is money you owe. Student loans, car loans, mortgages, credit card balances, etc.
Write down every item in both the asset and debt category, and assign a dollar figure to each one. Add up each category, and subtract the debt total from the asset total.
Is your net worth number positive or negative? A negative net worth is not the end of the world. Someone straight out of college, earning little but with large student loans, can easily have a negative net worth for several years until the debt is paid down considerably or the income increases in any meaningful way.
If your negative net worth is due to other debt, like credit cards or car loans, it may be time to reevaluate your choices.
I’ve given you eight ways to review your finances and goals. What are some positive steps you’ve taken to improve your financial situation?
Let me know with a comment, and let’s chat.