Financial Health: 8 Ways to Check

8 Ways to Check and/or Protect your Financial Health

Many of us see the doctor for an annual check-up.

Probably, even more of us have our car checked on a routine basis.

Few of us take a holistic view of our financial health, particularly, on a routine basis.

I encourage you to be an early adopter, change this, and become proactive with your financial health.

For our physical health, our doctor might check our weight, blood pressure/pulse, LDL/HDL and then compares the findings to our initial baseline results.

For our financial health, we should also establish a baseline /benchmark and then, periodically compare our results to our previous records,

How are we going to know how we are doing unless we take the time to look?

How are we going to tell if we are getting better if we don’t have an initial baseline to compare to?

The factors that you choose to use are up to you. My list includes possibilities for you to consider. Record your answers & date it. Some responses will result in a number, others will be a yes/no and perhaps initiate a new thought process. Here are my suggestions: 

  1. Determine your Personal Net Worth
  • Create a Balance Sheet: Assets = Liabilities & Equity
  • Assets are the value of what you own; liabilities are what you owe
  • Assets – Liabilities = Equity in a business or your personal Net Worth
  1. Review the Liability limits on your insurance policies (Homeowners, Renters, Auto, Business). Is the limit high enough to protect your Net Worth if something serious happened? You don’t want to leave your “assets” (money) exposed to risk of loss without making the conscious decision to do so.
  1. Cash Flow- Positive or Negative?
  • Money coming in, money going out, and when?
  • Is it steady through out the year or does it fluctuate?
  • Are you spending more than you bring in?
  1. Liquidity – Emergency Fund +
  • Emergency Fund savings for 3-6 months of living expenses?
  • Any other “reserves” you keep – Christmas or vacation fund?
  1. Your Personal Savings rate
  • Do you try to pay yourself first?
  • Are “you” built into your required monthly expenses?
  • Do you fully participate in your company’s matching program?
  1. Determine your Debt/Income Ratio
  • Lenders use this to determine your ability to manage payments
  • Total monthly debt payment/monthly gross income
  • 43% is generally the maximum for a Qualified Mortgage as per Consumer Finance
  1. Review your Retirement Allocations
  • Does it make sense?
  • Is it balanced?
  • Are you earning a return? 
  1. Check your credit score – It is your Financial Reputation
  • Obtain your free annual credit report from each of the 3 major reporting agencies, check it for accuracy, and dispute anything that is not correct
  • Obtain your FICO score

Taking the time to manage our money provides benefits:

  • Feeling in control
  • Knowing our capacity to absorb financial shocks
  • Finding if we are on track to meet our financial goals or
  • Having peace of mind and the flexibility to make choices

The road to financial freedom is full of potholes. If you take the time to discover, find, and fix them, your trip will be less eventful and you will reach your destination faster & safer.

May you have a safe, prosperous, and fulfilling journey.

Thanks for the reading!

Deb

P.S. I welcome and encourage comments and questions. It is one way to see how I am doing. 

Deborah Ann Fox, CPA is working to make a difference in peoples lives by helping them build and protect their financial health. She offers free 30 minute, no obligation consultations and is available for appointments – including remote. More information is available at http://www.DeborahFoxCPA.com. Questions or comments can be sent to debfoxfinancial@gmail.com.

Milestones & Mountains – the LGBT “Financial Playing” Field

In Honor of the 40th anniversary of the San Diego Pride Festival this weekend, I offer an update about “Financial Equality” for the LGBT community, with whom I celebrate the financial victories that have been achieved since we celebrated this festival last year. 

Last year, we had 2 huge U.S. Supreme Court 6/26/13 decisions to celebrate:

  1. The Defense of Marriage Act (DOMA), section 3, was declared unconstitutional
  2. Proposition 8 defenders lacked “standing” which cleared the way for Legal Gay Marriage in CA

We also celebrated because Same-Sex Marriages (SSM) had just been allowed to resume again after a long break between 11/5/2008 through 6/27/2013.

This year, we have many reasons to celebrate, let’s call them “milestones achieved”.

We still have some mountains left to climb before the SSM “playing field” matches the “playing field “ of married opposite-sex couples.

Perspective:

The right to SSM is important for many reasons. For example, Wells Fargo issued a study in June 2014, in which the top 3 rights and benefits were listed for those surveyed:

  • Healthcare decision making rights 61%
  • Insurance and healthcare coverage 58%
  • Inheritance rights 56%

Health care decision-making can affect the quality of life. Insurance, healthcare coverage, and inheritance rights, all have a significant effect on the “financial equality” of life.

These rights and many others are becoming available to those that can legally marry their same-sex partner.  T

Today, SSM rights and benefits look more like a patch-work quilt across the United States as compared to those enjoyed by opposite –sex married couples who begin to enjoy their benefits, often as soon as they say, “I do”.

There has been tremendous progress and numerous changes since we celebrated San Diego Pride last year. Milestones to celebrate now include:

Same-Sex Marriage is fast becoming a reality for more people:

  • 19 states & the District of Columbia have Legal Same-Sex Marriage and 31 states have Same-Sex Marriage Bans
  • 12 states have had gay marriage bans overturned and appeals are in progress
  • 8/29/13 All Legal Same- Sex Marriages will be recognized for federal tax purposes as per the U.S. Department of Treasury
  • 9/16/13 effective date for Revenue Ruling 2013-17 which reads: “that for federal tax purposes, the Service adopts a general rule recognizing a marriage for same-sex individuals that was validly entered into a in a state whose laws authorize the marriage of two individuals of the same-sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.”
  1. This opened the door to file original returns, amended returns, and claims for credit or refund for any overpayment of tax, provided that the applicable limitations period was still open under section 6511
  2. Couples can “pick and chose”, by year, which return, if any, they chose to amend, as long as the window is still open. Big return? Amend. Owe? Skip it.
  3. The window to amend the 2010 return, generally, expired on 4/15/14
  4. The 2011 1040 return can be amended until 4/15/15
  5. The 2012 1040 return can be amended until 4/15/16

Earlier this week, I attended an IRS DOMA seminar, which was introduced to about 300 tax professionals as “DOMA is about money, it has nothing to do with sex”.

SSM, is partially about money. The Windsor  (DOMA) case was about inheritance rights between spouses.

  • Federal tax law allows a deceased spouse to leave their assets, including a home, to the other spouse, without incurring estate tax. The Estate Tax Rate is 40%.
  •  The DOMA ruling resulted in Windsor being owed an IRS refund of $363,053 for the estate tax she had paid

The Estate Tax is a tax on your right to transfer property at your death.

  • Beginning January 1, 2011, estates of decedents survived by a spouse may elect to pass any of the decedent’s unused exemption to the surviving spouse. This election is made on a timely filed estate tax return for the decedent with a surviving spouse
  • 6/20/14, the Social Security Administration issued guidelines on eligibility for spouse-based retirement and survivor benefits, Medicare, and SSI benefits
  • 7/16/2014, the Connecticut Supreme Court rules that a Lesbian Widow has legal rights that predate Marriage Equality in the state.

Mountains:

  • SSM couples are unable to receive Social Security Spousal Benefits if they were married in one of the states that allow same-sex marriage but live in a restrictive state (reference Bankrate Retirement Blog 7/1/14)
  • Veterans benefits also are restricted for those living in states that do not allow same sex marriage (same reference as above)
  • The right to inherit pension benefits could fall under the “it depends” category. A recent 6/2/14 article about the Bayer Corporation provides some insight
  • Family Medical Leave Act does not cover same-sex spouses. Some employers grant this right to their employees and kudos to them.
  • Nationwide, there is not a federal law against LGBT workplace discrimination. A bill to accomplish that goal, the Employment Non-Discrimination Act, passed the Senate last year but has not yet been taken up by the House

In closing, as an American, I believe that all American’s should have the same rights and protections, under federal law.  The financial “playing field” should be the same regardless of whom you love and where you live in the United States.

Discrimination should be something all citizens do not have to fear or endure.

My name is Deb Fox and I am the proud sister of two gay brothers and multiple LGBT friends. I am an advocate and an ally. I believe in equality and am trying to do my part to make a difference, here now, today, and tomorrow.

Deb Fox is working to make a difference in peoples lives, hearts, and wallets. Although she earned her CPA in 1997, she is not currently practicing as a CPA. She does use her knowledge to help others protect their financial health and is available for side-by-side, remote, or mobile appointments.