Get Fiscally Fit in 2014, Part I

It is the first full week of another new year, and that means now is a great time to get in better financial shape. To help you do just that, over the next few weeks I will be taking you through a series of simple assignments that will help you to get on track in 2014.

First up is something that we all need to make sure we do from time to time, and that is to conduct a personal financial inventory of all of our assets. Here we can take a page from corporate CFOs, as they regularly are tasked with determining the precise value of their company’s assets.

Determining the value of your assets by conducting a personal financial inventory simply means you need to take a very close look at how much money you actually have, and in what type of asset class that money resides (equities, bonds, real estate, gold or silver coins, checking account, CDs, etc.).

You also have to make sure that you know where, and in what type of accounts, all of your money resides. And while this may seem simple on its face, you’d be surprised to learn just how high the percentage is of investors I speak with who aren’t quite sure about where all of their money is, or in what kind of accounts (retirement or taxable) they have.

You can start this process by simply creating a list of your taxable assets, as well as your tax-deferred assets. One of the benefits of this fiscal fitness exercise will be to find out how many companies you’re currently doing business with. If that number is more than two or three, then you should consider doing some consolidating.

You also should make sure that you include any life insurance policies or variable annuities in your personal financial inventory, since they also are part of your overall investment picture. Now, in this first step, we are not concerned with the individual equity or bond positions that you own. An analysis of these positions comes later. Rather, we are more concerned with just making sure that we know how much of our net worth is in liquid assets, and how much is tied up in real estate and other non-liquid holdings.

Here is a quick, step-by-step guide to conducting an inventory of your assets.

1. Collect all of your year-end statements as you receive them during the next several weeks, and keep them in one main file folder.
2. Make separate lists of your taxable assets and your tax-deferred assets.
3. Make a separate list of your life insurance and annuities.
4. Count the total number of financial companies you do business with.
5. Tally up all of your current debt, then determine if you can pay off any of that debt in 2014 (hint, start with the highest interest rate loans first).

Next week, we will look at the nuts and bolts of your holdings, including assessing the individual stocks, mutual funds, ETFs, etc. you might own. That way you can get a head start in determining if your investable assets are positioned for growth in 2014.