Now that the holidays have passed, most of us are turning our attention to the promise of a New Year. Whether you believe in making grand resolutions or you just want to start the year off on the right foot, taking a second look at your finances is an excellent place to start.
The following simple steps will help you secure your financial future in 2020 and beyond.
1. Know What You Have and Where it Is
As we grow older, our lives get more complex. It becomes increasingly difficult to keep track of everything you own. However, as your assets grow, it’s more important than ever to stay financially organized.
Make sure you have online access to each of your financial institutions and that you have a copy of all your policies, contracts, and most recent statements. If you have a spouse or significant other, ensure that he or she also has access to this information and knows where to find things like your will, living will, and the keys to your safe deposit boxes.
Now is also a great time to consider using a secure digital storage option for your important documents. This will help you stay organized and allow you to easily access themfrom anywhere in the world.
2. Review Your Asset Allocation
Thanks to this year’s market performance, many investment accounts have strayed from their ideal asset allocation, making now a good time to rebalance. While it doesn’t always feel good to reduce your position in a high-performing asset class, having the discipline to do so is an important part of successful investment management.
3. Know Your Net Worth
As you’re gathering your financial documents, take the time to make a complete list of all your assets and liabilities. Knowing your net worth can help keep you from focusing solely on asset growth and allow you to look at the big picture instead. It’s also an easy way to see if you’re on track to meet your goals and can raise a red flag if you’re carrying too much debt. Doing this exercise at least once a year will allow you to proactively make adjustments before they become a major problem.
4. Review (or Start) Your Legacy Plan
Your legacy is more than just the financial inheritance you’ll pass to your heirs. It’s also about sharing your life lessons, values, and vision for the future. Doing this properly takes time and preparation, and it’s never too early to start.
If you’ve already created a legacy plan, take a moment to review it. Reflect on the past year and decide if any of your experiences warrant an update to your plan.
5. Check Your Beneficiaries
If you’ve had any major life changes since the last time you checked your beneficiaries, do yourself – and your loved ones – a favor and take care of this task before the end of the year. Beneficiary designations, such as those listed on retirement accounts, annuity products, and life insurance policies, supersede your will and any other legal documents.
Marriage, divorce, the birth of a child, or the loss of a loved one are all possible triggers for updating your beneficiaries. Failing to take care of this important task can result in the wrong person inheriting your assets or cause you to inadvertently disinherit a loved one. To avoid this, reach out to your financial advisor or to each of your financial custodians to confirm your current designations and request changes as necessary.
6. Know Your Number
We all have a “number” that represents the amount of savings needed to comfortably reach our future goals. If you don’t know what your number is, now is the time to find out. A financial advisor can help you clarify exactly what you want your future to look like and develop a plan to help you get there. Knowledge is power, and you’re never too young or too old to clarify your financial needs.
If you’ve already gone through this exercise, it’s important to revisit it at least once a year. This will allow you to make adjustments based on any changes in your circumstances, goals, or the current economic conditions.
7. Revisit Your Savings Plan
Once you know your number, take a close look at how much you’re saving and spending. Are you putting away enough to reach your goals? Is there room in your budget to save a little bit more? The end of the year is an excellent time to ask yourself these important questions.
No matter where you are in life, you can almost always benefit from increasing your savings rates. Make this easy by setting up a systematic savings plan or bumping up the amount you’re already putting away each month.
8. Check Your Credit Report
It’s also good practice to review your credit report at least once a year to ensure there are no errors. Don’t make the mistake of paying for your reports. Under Federal law, you can request a free copy of from each of the credit reporting agencies once every 12 months by visiting AnnualCreditReport.com.
If you find a discrepancy, contact both the credit reporting agency and the institution that provided the information to the agency. It can take some time for them to research and resolve the problem, so it pays to do this proactively rather than waiting until it becomes an issue.
9. Review Your Insurance Coverage
At least once a year, meet with your insurance agent or financial advisor to review your current coverage. This includes your life, health, and property/casualty policies. Did you recently purchase a new piece of art, welcome a grandchild into the family, or develop a health condition? These are all examples of life changes that may impact your insurance needs. An annual review with a professional will help ensure that you have the right amount of coverage and aren’t overpaying.
10. Start Prepping for Tax Time
It’s hard to believe, but tax time is right around the corner. Before the year ends, talk to your financial advisor about any potential tax-loss harvesting. If you’re over 70 1/2 and have retirement accounts, make sure you’ve taken all of your required minimum distributions. Otherwise, you could get hit with a 50 percent tax penalty!
If you’re planning on making any charitable contributions and want them to offset this year’s taxes, now is also the time to write those checks. You may also want to start gathering your tax documents so you have everything ready when it’s time to file.
Schedule Your Financial Review Today
When you’re reviewing your finances, it’s often helpful to have a second set of eyes looking everything over.Working with a professional can help uncover problems and opportunities that you may not have noticed. If you would like to schedule a financial review, give us a call. We’re happy to help you get organized and set yourself up for success in the New Year.