There aren't many people who enjoy talking finances. But, taking some time to give yourself a financial check up can start your year off right—and keep your massage therapy practice on the path to success.
Get Your Free Credit Report
The Fair Credit Reporting Act gives you access to one free credit report per year from the three big credit agencies: Equifax, Experian and TransUnion. Pull a report from one of these agencies every four months and you can pretty easily monitor your credit for free.
For example, get your Equifax report in April, the TransUnion report in August and end the year in December with your Experian report. Be aware that you can’t access more than one report from each agency per year, so be sure to keep track of what agency’s report you pull and when.
These free reports aren’t going to include your credit number, but if you need to know this information, you can pay a minimal extra fee. Additionally, although you aren’t going to have to enter any credit card information, you will be asked some personal questions related to your credit history to verify your identity.
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Rebalance Your Investments
Taking the time to rebalance your portfolio is a great way to manage investment risk. It’s natural to think that rebalancing your investments is primarily about holding onto the winners and dumping the losers: what makes you money stays while what’s losing you money goes.
But as with most things concerning investment strategies, rebalancing is a little more complicated than that. (But don’t let that discourage you from taking the time to reassess your portfolio mix.)
Consider your investments from this perspective: You don’t want your portfolio to be overly dependent on the success or failure of one investment or asset class. That’s why most financial services professionals will advise you to diversify your investments. What’s gaining today could be losing tomorrow, and no one really knows what financial sector or investment style is going to rise to the top. And, if the economic downturn of recent years has taught us anything it’s that things can change—and fast.
Rebalancing is really about getting your investment portfolio back to its original balance so you can reap the most rewards from diversification. Have a look at what sectors your investments are falling into, making sure you aren’t overexposing yourself in one place (say technology, for example, or stocks). Then, view your investments one by one. Which have seen the most gains? As counterintuitive as the strategy seems, take some of the dollars from the investments that have realized gains and direct them toward less successful investments.
Now, too, is a good time to reassess your risk tolerance and redirect your investments to accurately reflect your position.
Clean Up Old Debt
Using credit cards to make purchases is tempting, especially for bigger purchases. And having some credit card debt isn’t necessarily a bad thing. But if you have three or four credit cards that carry significant debt, make an effort to tackle—and pay off entirely—at least one or two of those debts this year.
Take a close look at each statement you receive, and make note of the interest rate you’re being charged. If you have an interest rate that is noticeably higher than others, think about ways you can realistically pay the debt off. For example, some credit card offers you receive in the mail may offer no interest for a year on balance transfers, so you might want to consider transferring the balance and spending the next year paying the debt off.
An easy formula to follow when considering making a balance transfer is taking the total you owe and dividing by 12. This amount is what you’ll need to be able to pay monthly if you want to have a zero balance at the end of the year. Most—if not all—of these offers for no interest for a year are going to include information about what the interest rate will be when the deal ends, so if you can’t pay off the balance in a year, transferring a balance might not make sense.
Get Better Deals
Now is the time to start investigating whether there are things you can do to save some money on existing expenses. For example, if you carry any credit card debt (which ideally you shouldn’t), make a call to the company and see if they’re willing to offer you a lower, fixed interest rate. You might be surprised at what they’re willing to do for you, particularly if you have evidence you can get a better deal if you take your business elsewhere.
Give a quick look at those pesky offers that clog your mailbox: Are there offers that include a lower interest rate? If so, call up the company you currently use and tell them: “I have an offer for x interest rate and I’m thinking that might be a better way for me to go. What can you do for me?” If you’ve been a good customer and consistently make your payments on time, chances are they aren’t going to risk losing your business for a higher interest rate. Word to the wise: If you do secure a lower, fixed interest rate, things like late payments will nullify the agreement, so be sure you’re on time.
If you haven’t revisited your mortgage interest rate recently, doing so might be a good idea. Refinancing a mortgage isn’t as simple as calling up a credit card company, but a lender should be able to crunch some numbers for you to give you an idea of if the work of refinancing would make sense. Especially if you bought at the height of the housing bubble, seeing if you can lower your interest rate might save you a nice chunk of change each month.
If there are things you need either for your home or practice this year, do a little comparison shopping before making a purchase. Big or small, making sure you’re not paying more than necessary takes a little leg work but can be worth the effort. And when you find what you’re looking for, don’t be shy about asking for discounts.
- For bigger purchases, can you find financing deals that let you make interest free payments for a specified amount of time?
- Are there any incentives for paying upfront and in full, say a certain percentage off the price?
- A company might tell you no, but you won’t know that until you ask.
Also, take a look at what you pay for monthly, necessary expenses such as car insurance, cable, cell phone and Internet service, for a few examples. In these areas, comparison shopping can save you money, so revisit what you pay for these items at least once per year.
Audit Home Energy Use
It’s as simple as it sounds: spend a couple hours whenever it’s convenient for your schedule and walk around your house or apartment looking for opportunities to save energy—and money.
First, spend some time checking for any places in your home where you may have air leaks. Obvious places are around window frames and baseboards, but also make sure you look for air leaks where you might not suspect, such as electrical outlets, switch plates and attic hatches.
If you find any air leaks, take action to seal them. If you notice windows that are rattling or can see cracks in a door frame, consider caulking or weather stripping these areas. If your home is starting to show some age, think about spending some money replacing bad windows or doors.
Chances are that whoever built your home followed the recommendations regarding insulation that were in place at the time. And, like almost everything, those recommendations change over time. Particularly when the cost of energy is increasing, having a look at your insulation can be a great way to save some money.
Checking insulation levels in your walls is tricky, but if you have an attic, go up there and have a look. Check for gaps around ductwork, pipes and chimneys, using an expanding foam caulk to seal them if you find any. Also, make sure attic vents aren’t blocked by any insulation.
Lighting accounts for approximately 10 percent of your home’s energy costs, and though a lot has been made over the years about energy-saving lightbulbs, you can’t go wrong by having a quick look at what kinds of lightbulbs you’re currently using and making changes where necessary. For example, are there places you have a 100-watt bulb that might do just as well with a 60- or 75-watt bulb? Also, check with your energy provider to see if they offer rebates or other incentives for purchasing energy efficient lamps.
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Simulating disaster might seem counterintuitive, but most government agencies and corporations, for example, have simulated a disastrous situation in order to gauge their own preparedness, and you should consider doing the same.
Economic challenges, natural disasters—all things that are beyond your control happen, and you need to know if you’re in a position to respond to such an event positively and how, if at all, it’ll affect your business.
You can run different scenarios for yourself so you have a realistic picture of the shape you’ll be in should something unforeseen occur. What would happen if illness were to keep you from working for an extended period of time, for example? If your business decreases by 15, 20 or 25 percent, what will happen? Can you weather that decrease or will you have to close your doors or take on another job?
Now is the time, too, for taking stock of your savings. Having three to six months of expenses socked away for unforeseen incidents is considered a healthy amount, so carefully calculate your expenses and see how your savings stack up against that number. Then, if you’re short, look for places in your budget where you might be able save some money.
Learn to Say No
Many massage therapists come to the profession for one reason: they want to help people. And, sometimes, wanting to help others means we shortchange ourselves. It’s easy to justify extending your schedule for a client who is in pain but can’t make your regular office hours—you want to take care of them.
But sometimes, what works for your clients and what works for you are at odds, and that’s OK. It’s OK, too, for you to say no to a client when doing so is what you need to do.
Related: Creating Healthy Boundaries | 3 Credit Hours
The same philosophy can be applied to the purchases you make, or consider making, in this upcoming year. As consumers, we’re bombarded by advertising designed to entice us to buy. Our culture is littered with messages about why having more and buying more will make us happy. Why we need the latest technology, the newer car, the more expensive computer.
But, just as it’s OK to tell a client you can’t do something for them, it’s good to evaluate your buying habits and practice saying no to what you think you want and need more often than you say yes. You might not be able to afford the house you want. The car you drive—that’s completely paid for—might not be the latest and greatest.
But you know what? The money you’re saving by living within your means will come back to you both now and in the future—in the forms of debt not getting a chokehold on you and retiring on your own terms, to name two. So, the next time you reach for your wallet, step back for a few minutes and think about the purchase.
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