Changes in life can be large or small and come in a variety of ways. Some are planned and others are surprises; some are welcome and others are unwelcome. Those changes often influence our financial needs and objectives. Yet, we don’t always take action when we should as we go about our busy lives.
Like being physically fit, financial health requires preparation, discipline, and knowledgeable guidance. Periodic check-ups help your finances run smoothly. The start of a new year is a good time to evaluate your financial fitness and decide if adjustments and additional “exercise” are needed.
A checklist can be helpful to take the pulse of your financial fitness and point you to where action is needed. The first step is to review the list of potential life changes and put a checkmark next to those you have experienced in recent years. These should influence your thinking in step two.
Life Changes
- Birth or adoption of a child or grandchild
- Marital status
- Employer changed benefit plans
- Turn (or turned) age 59.5 or 72 this year
- Inherited assets (or expect to)
- Started a business, material change in a business
- Bought or sold a home or second home
Now review the items listed in the four categories below and place a checkmark next to those that need attention. You might checkmark an item because you are unsure if improvement is needed. Or, you may do so because you instantly knew that a gap exists, perhaps because it has never received the attention you know is needed.
Risk Awareness & Solutions
- Income replacement due to death or disability
- Protecting assets from the high costs of care later in life
- Protection against outliving retirement assets
Investments & Tax Strategies
- Income tax reduction strategies
- Tax deferred investing (e.g. 401(k), 403(b), Simple IRA, IRA, Roth IRA, 457 Plan)
- Retirement plan or plan review for my business – e.g. 401(k)
- Investments and portfolio monitoring, check-up
- Alternatives to maturing Certificates of Deposit (CDs)
Planning & Strategies
- Saving, debt reduction, budgeting and cash flow
- Education funding for children and grandchildren
- Retirement planning
- Withdrawing retirement assets wisely
Estate & Legacy Planning
- Beneficiary review and updates (e.g. life insurance, annuities, IRAs, retirement plans)
- Review of assets and liabilities
- Create or update estate documents (e.g. Will, Power of Attorney for Health Care)
- Charitable giving and bequests
Finally, decide to take action where you placed checkmarks in the four categories above. If you are not sure how to begin or need a guide, you can contact a financial professional, preferably one with fiduciary accountability. An advisor serving as a fiduciary is bound by a duty of loyalty and care. When managing your money and planning your financial future you clearly want to work with someone you trust and is acting in your best interest.