It’s a new year and a chance for a fresh start. While you’re busy tackling your resolutions, like organizing your closet or hitting the gym with renewed fervor, why not take a moment to consider your financial life? Are you financially fit and prepared for the future? If you’re unsure, but ready to whip your finances into shape, we’ve provided twelve key steps to help you get started.
Step 1: Write Down Your Goals
Putting your goals and dreams in writing makes them real. Create a list of the big things you want in life—travel, your own business, a vacation home, early retirement—and use the list as a starting point for the small steps you must take to reach them.
Step 2: Record Keeping
Organize home files and pull together your tax records. Talk to your advisors about which records to keep and for how long. Think of home record-keeping storage and filing in terms of disaster planning and estate planning. If you feel overwhelmed, think about hiring a professional organizer.
Step 3: Retirement Planning
Talk to your advisor about additional IRA contribution before the tax deadline. Analyze your portfolio for suitability and diversification. Are you contributing as much as you can? What are your IRA rollover options? If you are self-employed, review compliance requirements and vendors for performance.
Step 4: Focus on Tax Planning
Move beyond your annual tax return to a more formal tax planning and retirement strategy that will result in minimizing tax impact and increasing financial freedom in retirement. Sit down with a financial planning professional to discuss your current financial situation and how to improve it.
Step 5: Budgeting and Spending
If you want to save more and spend less, you need a budget. Determine personal savings goals and figure out if you have enough to go around each month to meet that goal. Automatic transfers are a great option for both liquid savings and retirement. If you are retired, review your distribution strategies and withdrawal rates.
Step 6: Increase Savings – Pay Yourself First
Resolve to save at least 5 to 10 percent of your take-home pay as you’re able to afford it, and choose the maximum contributions for which you qualify in your various retirement vehicles. If you haven’t signed up for your employer’s retirement plan, do it this year.
Step 7: Plan for Life Changes
If you are planning a career change, starting a business, moving or having a baby, these major life decisions should be considered from a financial perspective. Talk to your financial advisor about how to structure your income, savings and lifestyle to meet a new life stage.
Step 8: Create an Investment Policy Statement (IPS)
An IPS serves as a roadmap and report card for investment decisions. It helps you and your financial advisor make the proper decisions on investments to leverage your resources wisely and meet your goals. Learn more by visiting our website.
Step 9: Invest in Yourself
Additional training or another degree could increase your future income. Find the right 529 College Savings Plan for your children or grandchildren. If college is around the corner, reposition assets into retirement plans and other exempt assets as appropriate. The Free Application for Financial Student Aid (FAFSA) is due shortly after the first of the year.
Step 10: Review Your Coverage
Each year, review all insurance policies to see if you have adequate or surplus coverage, whether you could consolidate some coverage under the same carrier for a bulk discount, or if you could find less expensive coverage elsewhere.
Step 11: Estate Planning
In addition to tax-saving strategies, estate planning can help you get your financial affairs in order and leave a legacy. Review your investments to determine if you are doing all you can to maximize returns and protect your assets.
Step 12: Grade Your Financial Advisor
How well have your financial representatives served you this year? Have they approached your investments proactively or simply responded to your requests or questions? Do you know what fees you are paying? Set a meeting with your financial advisor to discuss investment strategies, IPS (see step 8), ties to investment products and level of fee transparency.
