Improving Your Financial Health in the New Year

While a typical New Year’s Resolution may be hitting the gym, starting a new diet or getting a check-up, people often overlook their financial “health” when looking to better their lives. The security, freedom, and peace of mind that comes with proper financial health can reap rewards in your life, your business, and your family. Here is a list of ways to perform your financial “check-up”.

1. Review and update your will.

The first thing you should look at in the new year is your will, assuming you have one (if you don’t, get one!). Something may have changed in your family situation that would change how you want your estate plan to look. You may have had a new child or grandchild, or sadly there may have been a death in the family. It is good practice to continually review your will throughout your life, while you are of sound mind and can ensure your wishes will be honored.

2. Review and update your beneficiary forms.

In addition to your will, do not overlook updating your beneficiary forms to ensure that your assets are distributed properly after your death. Beneficiary forms are for things like your life insurance policy, retirement accounts, and IRA’s. It is important to review these forms because they supersede your will. Do not let the government decide who gets your money!

3. Insurance

Life insurance is a big part of estate planning, and it may leave you with questions. Do you have enough life insurance? What type of insurance should you have, term or whole life? You should consult with our business advisors to help you decide.

Disability insurance is also a topic that may confuse people. How much should you have? Is it taxable? Again, consult with our professionals who can help guide you through these decisions.

4. Review your retirement plans.

Whether your retirement is decades away or on the near horizon, it is beneficial to review your plan and make sure that your allocation of equities and fixed income is where you want it to be. Are you contributing the proper amount? Does your company have a match and are you taking advantage of it? Many people are unaware of the full benefits of their company’s plan. Work with our financial advisors, who will help yo answer these questions.

There are several retirement plans that you should inquire about with your company. You should find out if your company has a Roth 401(k) provision, and if you are eligible to contribute to it. You should also inquire as to whether you are eligible to contribute to an IRA in addition to your retirement account. And finally, you should inquire if you are eligible to contribute to a Roth IRA. A Roth IRA is tax free for the rest of your life, but it is not tax deductible. Consult with our business advisors so that we can help you decide if this is an option.

5. Understand your debt situation.

To continue with your financial check-up, you should be reviewing all of your loans. For example, do you have a mortgage that can be refinanced? Today’s interest rates are at historic lows, so you should review your mortgage and your home-equity line of credit to determine whether or not you should refinance.

Also, review the status of your credit card debt to see if you should have a home equity loan to pay off your credit cards. Credit card debt is particularly damaging to your finances, due to the exorbitant interest rates that they charge you. Work on a plan to pay off large balances and develop a budget to be able to pay off routine balances each month. Student loan debt requires similar diligence and planning – interest rates for school loans are often similarly high. Learn about how you can consolidate or refinance.

6. Make a budget.

Creating a budget is a good first step in achieving your financial goals. Most people spend what they make and do not save. If you keep track of what you spend in a month, you can determine what costs you can cut, where you should be more disciplined, and how much you can bookmark for savings and investing.

7. Invest!

According to Gallup, only 55% of Americans reported being invested in the stock market as of 2019. Many are unfamiliar or intimidated by investing, and therefor forego it altogether. Anyone can invest, and it doesn’t take much to get started. Everyone should try and save at least 10% of their gross income each year to invest in financial assets. Your budget will help you to see what you have available to invest.

How to invest varies based on an individual’s unique needs and goals. For example, for parents and grandparents of young children, a 529 plan would be a good investment. A 529 plan is designed to save for future higher education costs.

8. Required Minimum Distributions (RMD’s)

For those of you who are 70 or older, you should understand what you required minimum distribution may be, which is the amount you must take from your retirement accounts. You can consult with our tax advisors to get the answers you need.

9. Be proactive, not reactive.

Proper planning and strategizing can help you avoid financial pitfalls. It is better to plan ahead to achieve a positive outcome, rather than deal with problems as they come. With good financial health and literacy, you will be able to weather any storms that may come your way. Sit down with your trusted advisors, asks a lot of questions, and develop the plan that is best for you.