You wanted to make the best financial moves possible this year. You started out great, but after a while, your time and attention got diverted elsewhere and you didn’t pay as much attention to your financial planning as you wanted.
Don’t get discouraged.
Financial Planning Tip #1: Do Nothing
Seriously. If you have a well-built investment portfolio in place, guided by a relevant investment plan, your best move in hyperactive markets is to let that plan be your guide. That often means doing nothing new with your holdings. Yep. Do nothing. We list investment inaction as a top priority, because “nothing” can be one of the hardest things to maintain when the market is in perpetual motion. Remember, the market will fluctuate, but a good financial plan weathers those storms.
Financial Planning Tip #2: Double Down on Planning
This second tip may sound like a contradiction to the first one, but it’s not. A “do nothing” approach to the markets hinges on a having relevant plan in place, guiding your appropriately structured portfolio. A fresh, new year can be a great time to tend to your investment plan – or create one if you haven’t done so. Have any of your personal goals changed? How might this impact your investment mix? Have market conditions put your portfolio ahead of or behind your schedule? Do you even know where your investments stand? Now is the time to shore up financial plans and make sure they stay relevant to you and your personal goals.
Financial Planning Tip #3: Prepare for the Unknown
Time will tell if 2020 markets are friendly, foul, or (if it’s a typical year) an unsettling mix of both. No matter what the market does, you need a rainy-day reserve fund for those unexpected situations that crop up—and they will. Because life happens. Having enough liquid, rainy-day dollars will sustain you through any rough patches, no matter what lies ahead. Knowing your short-term spending needs are covered will help with both the practical and emotional challenges of emergencies, so you can leave the rest of your portfolio fully invested as planned.
Another aspect of preparing for the unknown is making sure you and your spouse stay informed on the household finances. Most families have a household CFO, the one who is in charge of paying the bills, filing taxes, determining when to purchase big-ticket items, and investing whatever’s left. This arrangement will work fine as long as both of you are aware of bill payments and other responsibilities. That way, if the non-CFO is unexpectedly left in charge, the household finances can continue to run smoothly. You don’t want to compound a crisis by losing track of your finances.
Financial Planning Tip #4: Establish or Increase Contributions
The more you invest toward retirement (or similar goals), the better you can take advantage of compounding and market returns to accelerate your efforts, especially if your employer matches your contributions. The 401(k) contribution limit for 2020 has increased to $19,500, up from $19,000 in 2019. Contribution limits for 403(b) and 457 plans have also increased from $19,000 to $19,500. If your lifestyle spending is slightly higher than average, you’ll need to save in additional ways (like a Roth IRA or other investments) to meet your spending needs later in life.
Financial Planning Tip #5: Review Your Financial Landscape
While you’re staying the course with your investments, you still need to review other aspects of your financial plan such as your insurance, taxes, and giving. While you don’t necessarily need to act on everything at once, it’s worth reviewing these areas and identifying issues in need of attention. Maybe you’re still carrying a debt load you’d like to reduce, or an estate plan is no longer relevant. Perhaps you haven’t reviewed your insurance line-up in a few years, or you’d like to revisit your philanthropic goals in the context of the latest tax laws. Reviewing these items is likely to contribute more to your financial success than will fussing over the stock market’s daily gyrations.
Financial Planning Tip #6: Perform a Cybersecurity Audit
Protecting yourself against cybercriminals is a necessity in today’s world. In the new year, revisit a few basic, protective steps, such as changing key passwords on your most sensitive accounts; reviewing your credit reports (using AnnualCreditReport.com); and placing a freeze on your credit file to block unauthorized access (now free, based on recently enacted federal law). With child identity theft on the rise, you also need to audit their personal information to protect them from becoming a victim of cybercrime.
Financial Planning Tip #7: Have “The Talk”
Speaking of your kids, when is the last time you’ve held any conversations about your family finances? It’s never too soon to begin preparing your minor children for a financially literate adulthood. As they mature, their financial independence doesn’t happen by accident. You need to have ongoing, in-depth conversations about money, budgeting, debt, and investing. Also, as you and your parents age, you and your children must prepare to step in and assist if dementia, disability, or death take their tolls. Don’t put off having that conversation with your aging parents.
You also need to initiate ongoing conversations related to any legacy you’d like to leave as a family. For all these considerations and more, an annual “money talk” can be critical to successful outcomes. With clearly set guidelines and expectations, and ongoing discussions, you are establishing a strong financial foundation for the future.
Financial Planning Tip #8: Hire a Fiduciary Advisor
We’ve barely scratched the surface of the actions you can take to contribute to your wealth this year. None of them are terribly time-consuming by themselves, but you can feel overwhelmed if you consider them as a whole. That’s why you need to hire a fiduciary advisor. Having someone in your corner with your best interests in mind can be the best financial decision you make this year.
With these eight ways to bolster your financial well-being, you can thrive no matter what the stock market does in the year ahead. So be it resolved for the year ahead: take action. Get the help you need to reach your financial goals.
At Cogent Strategic Wealth we work with families like yours every day to convert their dreams into plans, and their plans into reality. Contact us today so we can help you, too. Your money and your dreams hang in the balance, so let’s get to work!