Planning

Research Yourself

A journey of a thousand miles begins with a single step.

– Lao-tzu

This post begins a series on Balance Basics that will provide some tips to start improving your balance sheet. If balance is a journey, you need a map. We’ll construct our map using the Shampoo Cycle as a guide, so the first task is to answer the question “Where are you?”. This isn’t as easy to answer as it first appears, so let’s get started.

To understand your current financial situation, you need to do some homework on yourself. Take your time with this process and do the best job that you can. Your success with future steps depends on it. Gather any and all documentation you can find pertaining to your finances. It’s all organized in a filing cabinet at your fingertips right? Don’t worry. I’m still working on getting my files in order too. This exercise might help you do just that.

  1. Your Will: Yes, this is a financial document. Yes, you must have one.
  2. Insurance Policies: This includes life, home, and auto insurance, and any disability or critical illness coverage that you have with or outside your employer.
  3. Bank Accounts: chequing, savings, TFSAs, or any other account where you keep cash. Note the interest rate and balance for each.
  4. Credit Card Accounts: Note the balance and interest rate for each, and how often you use it.
  5. Mortgage Documents: Note your interest rate, term renewal date, remaining amortization, and current balance owing. Your mortgage provider may allow you to access this information online. Otherwise, call them to find out. Also, give a rough guess as to what your home would sell for if you needed to sell it today. Look at recent selling prices for similar homes in your area.
  6. Line of Credit: Note the amount owing and interest rate for any lines of credit you have.
  7. Auto Loans: Again, note the interest rate, amount owing, and when the loan will be paid off. If you don’t know, call your financing provider.
  8. RRSPs: Get out your statements and look at how much you have invested, where, and how much you have made or lost over time. If you are with a standard mutual fund company, this is easier said than done, especially if you have been making contributions. It can be difficult to separate gains due to investment performance from gains due to your contributions. Still, a ballpark figure is better than no figure.
  9. RESPs: This is the same as RRSPs above, but you might want to note how you are doing relative to contribution limits and how much grant money (CESG) you have received.
  10. Other Investments: Again, figure out your balances, rates of return, and any income you receive from them. This could include any real estate (other than your residence) that you own, or non-registered stocks, bonds, funds, etc.
  11. Bills, Receipts, etc.: Figure out and make a note of how much you are spending on fixed and variable expenses like heat, electricity, water, phones, T.V., groceries, eating out, insurance, auto fuel and maintenance, property taxes, child care, or anything else. The more detail you provide, the more accurate your research will be.
  12. Recent Pay Stubs: Note any income received from employment. If your income is irregular due to self-employment or commision sales, provide a conservative estimate of average monthly income.

It’s important to do this a way that makes you most comfortable. There isn’t only one right way. For myself, I would probably start with a pencil and paper gathering of numbers and details. I kept track of our finances for years like that until I discovered Excel, Numbers (for Mac), and Quicken. One thing I would suggest, no matter how you choose to log the information, is to separate it into categories like debt, investments, expenses, savings, etc. and maybe keep a separate folder for each.

Give these tasks as much time as it takes. Don’t get discouraged and don’t give up. The effort and perseverance will pay handsomely.  These tasks are not fun, especially if you haven’t done them for a while (or ever), but I can assure you that over time, your improved balance sheet will make it worth the trouble.

What interesting ways have you come up with to organize and conduct your self-research? How do you motivate yourself to stick with tedious projects like these?

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