Use November to organize your finances

The weather is cooler, the days are shorter, and November is a great month to get your finances organized!

This article will provide eight steps you can take. I encourage you to complete the first two steps, which are to create a net worth statement and an emergency fund. All the other steps are optional. Peruse them, and choose the ones you like! The reward is that Thanksgiving is coming up, and you can be thankful that you are in control of your finances.

■ Create a net worth statement. This is a simple, but essential step. Simply write down a list of your assets, including the estimated value of your home, the recent balance for each of your investment accounts, the current balance in all your bank accounts (checking, savings, CDs, etc.), and any other assets you own. Then make a list of your liabilities, which are your debts. This often includes the balance on a home mortgage, possibly a car loan, student loans, and credit cards that are not paid off in full each month. If you want a template for your net worth statement, there is one available at www. donnaskeelscygan.com/ insights/tools/. However, a piece of paper and a pencil works just as well.

Once you have completed your net worth statement, place it in a safe place. Plan to revise it in November 2022, and you will likely see a higher net worth. Focusing on our finances tends to help them grow!

■ Create an emergency fund. If you do not have a “rainy day fund” open a savings account or a money market account, and start saving. The goal is to save enough to cover between four and six months of your expenses. Do not commingle your emergency fund with other money. Keep it separate.

■ Run a credit report with all three credit agencies. These reports are free, and you can also request your credit score at no charge. Review the credit reports. If you find the report lists old credit cards you have not used in many years, call the credit card company and cancel the cards. If you have inaccurate information on your credit report, correct it. The contact information for all three credit agencies is provided in the accompanying box.

■ Attack credit card balances with a vengeance. If you have any credit cards that have balances that are not paid off in full each month, lay them on a table and write down the current balance on each. Decide which credit card you want to pay off first, and commit to paying extra on that card until the balance is zero. Do this for each card. While you are paying them off, do not use the cards to buy new items.

Contribute to your ■ employer’s retirement plan if the employer provides a match. Often an employer will provide a 3 percent match if you contribute at least 3 percent of your salary. If you earn $50,000, you need to contribute at least $1,500 (that’s 3 percent), and your employer will contribute another $1,500. This is literally free money that you do not want to pass up! If your employer’s plan offers a Roth option (of a 401(k) or 403(b)), choose the Roth option. Of course, you can contribute more than the amount needed to get your employer’s match. For 2021 you can contribute up to $19,500 if you are under age 50, or $26,000 if you are age 50 or over. Contributing as much as possible is especially valuable if the Roth option is available in your employer’s plan.

■ Fund a Roth IRA. If you do not have a Roth IRA—and your adjusted gross income is less than $125,000 if you are single or $198,000 if you are married—you can fund a Roth IRA up to $6,000 per year if you are under age 50 and up to $7,000 if you are age 50 or over. You can fund the Roth IRA for the 2021 tax year up to April 15, 2022, but why wait? Start funding it now.

■ If you are already contributing to your employer’s retirement plan (at least up to the match provided by your employer) and you are already funding a Roth IRA, then start funding a taxable account. This is sometimes called a brokerage account. Saving in a taxable account is always wise, because capital gains taxes are currently at a preferential rate when compared to regular income tax rates.

■ Give generously to others. After organizing your finances, you will likely find that you can afford to help others financially. This is one of the greatest rewards of being financially secure. Maya Angelou captured the spirit of giving back when she wrote:

“The charitable say in effect, ‘I seem to have more than I need, and you seem to have less than you need. I would like to share my excess with you.’ Fine, if my excess is tangible, money or goods, and fine if not, for I learned that to be charitable with gestures and words can bring enormous joy and repair injured feelings.”

Happy November! Happy Thanksgiving!

Donna Skeels Cygan, CFP, MBA, is the author of “The Joy of Financial Security.” She has been a fee-only financial planner in Albuquerque for over 20 years, and is the branch manager for the Mercer Advisors office in New Mexico. Contact her at dscygan@gmail.com.