Broker Check

Spring Cleaning for your Finances

| May 01, 2017
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Now that the deadline for filing your taxes has passed, it is a good time to review your finances and make sure that you are on track to meet your goals.  Here are a few financial strategies that may benefit you.  These are “Best Practice” ideas specifically designed for individual investors and families to reach their financial goals. 

Are you building wealth?

Look back a year ago and compute your net worth. This is the total amount of your assets (such as your home, savings, investments, and retirement accounts) minus your liabilities (debts such as home mortgage and bank loans). The result is your net worth. Next, compare your net worth from a year to now. Is your net worth more than it was a year ago? If so, you are building wealth, and in our slow economy, any increase in wealth shows you are probably on the right track. 

As you’ve recently filed your taxes (or an extension) it’s also a great time to assess your retirement plan contributions and possibly adjust your withholdings.

Are you taking the right amount of risk with your investments?

It is very easy to measure investment returns. The internet is full of calculators that will tell you investment performance, even down to each day, but there is not an easy way to determine how much risk you should take as an investor. As a team with multiple practicing Certified Financial Planner® professionals, we find that most people don’t know their risk tolerance or adjust investments to match their own risk profile. So, determine if your investments reflect your personal risk tolerance. If not, you need to adjust your strategy right away.

Are your investments actively managed? 

Some investment advisors can offer investors access to actively-managed investment strategies that were previously only available to large institutions and wealthy investors.  These strategies have a primary objective of controlling investment risk while seeking reasonable returns by rebalancing your holdings more frequently as market conditions change.  These strategies are especially suitable for investors who are concerned with managing their investment risk as our economy changes its direction.

Are you covering your long-term care and life insurance needs with an efficient combined policy?

These policies can provide you and your spouse joint life protection while also allowing you to access the policy’s death benefit to pay for Long-Term care costs that include nursing home care, home health care, hospice care, etc.  These policies also have “simple underwriting”- with no needle sticks.  These hybrid policies are an alternative to the traditional “use it or lose it” long-term care policies offered in the past.  If you don’t use the long-term care benefits, your heirs keep the money – not the insurance company.

Have you updated your ICE “In Case of Emergency” folder?

If you haven’t done so recently, the people you love will appreciate you creating a folder of information that will help them figure out how to handle your finances in case anything happens to you.  Items to include are the the usernames and passwords someone would need to manage your finances as well as account numbers, list of your advisors, a list of bills you pay each month, etc. This can be a literal folder or a folder on the desktop of your computer. If you go for the more high-tech option, make sure to rename the folder something innocuous (our suggestion: ”something innocuous” for security reasons) and fill your loved ones in on the folder’s alias.

Have you reviewed your budget lately?

Review your billing statements from the past six months with three different color highlighters.  Then use one color to highlight your necessary costs (utility bills, insurance, groceries, toiletries), another to highlight discretionary items (wants rather than needs), and another to highlight purchases that you don’t think you’ll repeat.

After highlighting your “problem areas,” add up the 3 areas and assess where you could, if necessary, improve upon your spending habits.  Come next spring, you’ll have a record of the year’s spending and can even see how your spending has “trended” over time.

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