Over the past few years, the complacent stock market and economy have allowed investors to ignore their portfolios and maybe even their financial plans - and still possibly be successful with both. However, the start of a new year and the recent media coverage of the volatility in the stock market have reminded investors that our own personal finance requires our attention each and every year. Some of the attention is vital (such as making sure you have a current Power of Attorney), and some of it is maintenance (like updating your address after a move). As the busyness of the holidays gives way to the business of the upcoming year, we encourage you to consider 19 items as you plan your route to success with your financial goals in 2019. Without further ado, here are our top 19 for 19:
- If you still work, check that you are maximizing your contributions to your retirement plan within your budget. The allowable contribution increased this year, which means your contribution can increase.
- If you are contributing to a 401(k), check that you are contributing correctly to your traditional vs. your Roth 401(k). Unclear about how to do that? Check out our calculator.
- If you work in the “gig economy” or are self-employed, consider funding your own retirement plan. You can start with a Roth or traditional IRA – see the funding limits here.
- If you have people who depend on you for your income, check to make sure that you have the right amount of disability and life insurance. You can use our calculators to help you figure out the coverage you may need.
- If you are 70½ or older and own a retirement investment, you have an annual Required Minimum Distribution (RMD). The amount is calculated by your IRA or retirement plan custodian, and you can choose to take it at any time during the year. If you don’t take it by December 31, there is a 50% penalty, which is why we really recommend working with a professional on this. You can start with an estimate of your RMD here.
- If you are at the age that you need to take RMDs but you don’t actually need the money, you can direct your RMD to a nonprofit organization in a tax neutral transaction. You will not be taxed on the withdrawal, and your donation will not be deductible. This Qualified Charitable Distribution has a cap of $100,000 and must follow certain rules.
- If you are under the age of 70½ and would like to make a charitable contribution but don’t have the ability to deduct the contribution due to the higher standard deduction enacted as of last year, consider tax bunching.
- If you are over the age of 18 and own anything, make sure you have a valid will. Everyone has a will – either you write it, or your state of residence does. Take control of this one and get your will written by an attorney who has experience in this area.
- If you are over 18, and especially if you are single, make sure you have a Power of Attorney. If you lose the ability to make decisions for yourself, you really, really don’t want to leave this one up to the courts or to the person that the court deems to be the one who knows your best interests. Choose someone you like and is capable to be your POA, and talk them through your wishes.
- If you have a goal to save more money than you currently do, figure out how you can do that. It might be as simple as eating at home one more night a week, avoiding the mall for a few months, or tracking your spending so you can see where dollars slip through the cracks. We’ll talk to you about our proprietary MONEY budget strategies in an upcoming blog.
- If you have no idea whether you are on track to achieve your goals for retirement or education, talk to a CFP Professional who can help you figure out how to balance your competing goals. For a quick calculation, start with how much you need to save for retirement here.
- If you recently received a raise or expect one in the next few months, consider keeping your spending the same and directing your new income to your bigger accumulation goals, or your goals to pay off debt.
- If the recent stock market volatility has you wondering whether the market is a good place for your money, you might want to check your risk tolerance and consider whether your asset allocation (which types of funds your money is invested in) is still the right fit.
- If you are one of the people that falls into the stat of not being able to make it through a $500 emergency, consider building your emergency funds. A small emergency should not cause you to have credit card debt, call your parents to borrow money, or stop buying essentials such as food or gas. The most common way to build emergency funds? Spend a short amount of time (maybe as little as 1-2 months) redirecting discretionary spending (gourmet coffee, pedicures, eating out, drinking out, shopping, you get the idea) into your savings account.
- If you have unusual expenses coming up this year – a remodel, a big trip, a new baby – start saving for it now so that you are prepared.
- If you are leaving the corporate world and transitioning to the gig economy, make sure to research how you will replace the benefits you had with your company. Look into a health plan, disability insurance, life insurance, and your retirement plan options. Your HR department should be able to give you the dollar value of the cost of your benefits, so you can be prepared to set funds aside to continue those programs that are so beneficial in a financial plan.
- If you have not reviewed your beneficiaries in the last year, do so today. Since none of us know when we’re going to die, we should make sure that the people we care about receive what we want them to. You don’t want to be the guy who forgot to change his beneficiary from his ex-wife to his new wife.
- If you have children under the age of 18 and would like to list them as a beneficiary, consider using a Children’s Trust, which would “own” the assets until the children reach a certain age that you choose. Certain assets become very messy if left directly to a minor.
- If you feel overwhelmed by this long list of ways to improve your personal finances, look back over the list and pick just one. Choose the one that either scares you the most, will make you feel the best (finally paying off that credit card!), or is the easiest win.
And if by any chance this wasn’t enough for you to chew on, we have more resources, including calculators, tax forms, and a glossary of money terms, available on our website as you plan your year.
These tools just scratch the surface of the holistic plans that we create. We help our clients to use their money to have the lives they want. If you need help with your financial plan, contact us at email@example.com, or at 972-980-7526.
This material is intended for informational purposes only and should only be relied upon when coordinated with individual professional advice. Neither FSC nor its registered representatives, provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.
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