Thursday, October 30, 2014

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Tax Time a Good Time to Put Together Statement of Financial Position

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Since you're already knee-deep in bank statements and W2s, you may want to turn tax time into your annual financial physical. NY1's Tara Lynn Wagner filed the following report.

Tax time may make your head swim, but since you've already gathered all your financial documents, CPA John Vento says why not dive a little deeper?

As author of the book "Financial Independence: Getting to Point X," Vento says that this is the perfect time to put together a statement of financial position. Sounds complicated, but it's really just a list of your assets.

"Things like your bank account, things like your home, things like your IRA account," Vento says.

It also includes liabilities.

"That includes your mortgage, student loan interest, credit card debt," Vento says.

Subtract everything you owe from everything you own and you've got your net worth. Next, turn you attention to what you want, your financial goals. Depending on where you are in life, these will vary: saving for retirement or college, paying off credit card debt, maybe building a down payment for a home.

While you're focused on the future, you want to make sure you and your family are protected with the right amount of insurance.

"Because God forbid, one of the wage earners passes away unexpectedly, how is the family going to continue to pay for the overhead of living, for future college costs and so on?" Vento says. "So you have to really analyze your own personal situation and ask yourself, 'Which type of insurance is important to me at this point in my life?'"

Since you're looking at your whole financial picture, now is also a great time to review your estate plan. Think you don't need one? Think again.

"Everyone needs to do estate plans. It's not just for the wealthy," Vento says. "For many people, writing a will, getting a will drafted by an attorney, along with a health care proxy and power of attorney, those are extremely important documents that everyone should have in place."

Finally, Vento says take a deep breath and then take a long, hard look at your expenses. If you get a year-end credit card analysis, that alone can be a real eye-opener.

"It's amazing, when people go through this exercise, how often they realize, 'You know, I can't believe how much money we spend going out to dinner every Saturday night,'" Vento says. "And that helps you make decisions, lifestyle changes."

They're little changes that can make a big difference to your bottom line.

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