For Individual Investors in the US

It’s Time to Conduct Your [Financial] State of the Union

Ben Rizzuto, CFP®, CRPS®

Ben Rizzuto, CFP®, CRPS®

Retirement Director


Mar 4, 2022

A Financial State of the Union (FSOTU) is a dedicated time to sit down and take stock of your finances, bills, goals, savings and other important matters. Retirement Director Ben Rizzuto discusses how valuable this exercise can be and offers tips to help you conduct your own FSOTU.

President Biden delivered his first State of the Union (SOTU) address on March 1. In it, he spoke about the Russia-Ukraine conflict, the COVID-19 pandemic, the economy and other issues important to Americans.

Another SOTU recently occurred that you may not have heard about. Away from all the cameras, coverage and analysis, at a small coffee shop near our house, my wife and I sat down for our Financial State of the Union (FSOTU).

This is something we’ve done regularly over the past several years, at least once a year if not even more frequently. We’ve found it to be extremely useful, both in terms of getting our finances in order and in providing some peace of mind on how we’re progressing toward our long-term goals. It’s something I think pretty much every household can benefit from, so I’d like to offer some tips to help you conduct your own FSOTU.

Some of you may be asking, “I already look at my bank accounts every month, I’ve set up a budget … why do I need to do this?”  As a matter of financial fitness and security, I think it’s important for you and your significant other (or just you if you’re single) to sit down and take stock of your finances, bills, goals, savings and other important matters – the full picture, not just the usual month-to-month expense tracking and bill paying.

There is something to be said for the ritual of it all as well. The fact that we call it our FSOTU and the fact that we set aside time for it helps lend value and a certain formality to the exercise.

Our FSOTU is also an important part of our family conversation. We make sure to tell our daughter what we’re doing and why we devote this time to discuss these issues. Remember, financial education and financial literacy are skills that start at home and are most successful when done at home.

FSOTU

During our FSOTU, we discuss many of the issues that are going to affect us financially over the course of the next year and into the future. We review our income and expenses and make decisions on where changes or improvements can be made. We decide which debts we want to focus on paying down sooner rather than later. We talk about projects that need to be completed around our house and other goals that we have, such as taking a vacation or increasing the amount we’re contributing to our retirement accounts. Sometimes the goals my wife and I have may differ, but we go into this discussion with openness and honesty and find compromises that align with our short-term and long-term objectives.

Overall, these meetings help us take stock. We’re able to feel more secure knowing where we stand and where we’re headed, and I feel they’ve helped us become stronger as a couple as well.

Hopefully this helps you better understand the value of this exercise and why I’m advocating for it. And now, here are some tips to help you conduct your own FSOTU:

Logistics:

  • Schedule time to sit down. Put it on your calendars during a time outside of work hours when you won’t be distracted.
  • Make sure kids are at school or somewhere else so you aren’t pulled away unexpectedly.
  • Go somewhere outside the house that has Wi-Fi access (again, I feel this helps minimize distractions and make things feel more formal).

Items to cover:

  • Income
  • Credit cards and other debts
  • Student loans
  • Retirement plans: How much from each paycheck is going into your 401(k) or other savings accounts? Does your portfolio need to be rebalanced?
  • Goals: This can be short-term (e.g., saving for a vacation or home improvement project) and/or long-term goals (e.g., buying a house).
  • Monthly bills: Review expenses and see if changes can or should be made.
  • Estate planning: Create or review your will.
  • Savings: Decide how much and how often you want to contribute to pre-tax, after-tax, and/or tax-free accounts.
  • Education fund: Have you opened a 529 account for your child(ren)? Remember that in many cases, 529 assets can be used for K-12 expenses as well as college.
  • Projects: Home improvement, car repairs, etc.
  • Emergency Savings Account: Many say that having 3-6 months of expenses set aside is best, but if nothing else, make sure you have an account set up and start with a smaller amount (e.g., $500).
  • Insurance: Review auto, home and other policies to make sure you are appropriately covered.

Things to bring to or access during the meeting (Get these items together beforehand and make sure you can access account websites before you sit down together. This will help you  get the most out of the time you’ve set aside.)

  • Copy of last pay stub(s)
  • Most recent statements for bills/debts
  • Retirement plan or savings account statements
  • Insurance statements
  • Copy of will
  • Laptop
  • Paper and pen

After going through these items, my wife and I sometimes make significant changes. In other cases, we may not make any changes at all. Either way, reviewing these items helps us feel much more in control of our financial situation.

Remember, the lists above can be updated based on your situation, but my hope is that this gives you a starting point from which to create an ongoing conversation about your finances. I assure you that by conducting this meeting regularly, the state of your (financial) union will be stronger!