For those of you who have procrastinated in the past about doing financial planning, Now is a “perfect time” to map out your strategy.

What follows is a brief outline of the areas you need to address:

1. Determine your spending habits.

  • Look at your expenditures from last year.
  • Break them out between necessities (food, utilities, transportation, mortgage payments, rent, etc.) and non-necessities (vacations, hobbies, entertainment, recreation etc.).
  • Make sure you have three to six months of cash available in case of an emergency, such as an unexpected job loss, in order to cover the necessity type of expenditures.
  • Also, set aside amounts for planned expenditures such as a vacation or the purchase of a new car.
  • Finally, determine if you can cut back on any of your expenses.

2. Determine your net worth.

  • Begin by adding up the value of your assets (house, car, boat, investments, 401(k), etc.).
  • Next, subtract the amount of your liabilities (mortgage balance, credit card debt, loans, etc.).
  • The result is your net worth.

3. Prepare a credit plan.

  • As a result of determining your net worth, you know the exact amount and nature of your debt.
  • Begin by checking your credit score report (www.myfico.com).
  • If you have too much credit card debt, create a realistic pay-down plan.
  • Find a credit card company that offers the most favorable terms on balance transfers, and use the new account to consolidate your debt balances, but consider any negative impact on your FICO score first.
  • Make sure that you stick with your pay-down plan.

4. Determine your philosophy relative to investing.

  • Write down your long term and short-term goals (why you are investing).
  • Determine you risk tolerance (what mix of investments will allow you to sleep at night).
  • Consider your tax situation and how often you want to rebalance your mix of investments.
  • Remember, investments are only a vehicle to help you attain your goals and objectives.

5. Do tax planning throughout the entire year.

  • Maintain good records. Keep receipts.
  • Analyze your current social security statement for accuracy.
  • Consider the tax implications of any major expenditure.
  • Review your prior year tax returns to become more familiar with the type of income and deductions you typically incur.
  • Educate yourself relative to the tax nuances for your income and deductions.

6. Make sure you have adequate insurance (property, health, life and disability).

  • Appropriate insurance coverage is critical to any financial plan. This is not area where you want to skimp.
  • Make a list of all coverages.
  • Determine your deductibles, over all limits, co-payments, premiums, etc.
  • This should be reviewed annually and discussed with your insurance agent.

7. And finally, resolve to save more.