While it’s great to set goals for a healthier lifestyle, it is equally important to focus on your financial wellbeing. Check out these financial resolutions and organization tips for 2021!
The best place to start is to get your balance sheet in order. Use December 31 as the effective date and update your personal balance sheet. This means listing your assets and liabilities. If you are retired, include income you receive from Social Security, pensions, retirement plan assets or other sources. Having these numbers up to date is crucial to the next steps.
Build a Budget
If you don’t have a budget, you should consider creating one. If you have a budget, review it. Look at what you planned to spend last year and what you actually spent. What do the numbers tell you about spending? Where can you cut costs? Start with what you expect to have as income. Be realistic with your numbers, and then assign those dollars to the various expense categories. It’s important to maintain a certain amount of flexibility for things that can’t be pinned down, like healthcare.
Designate, Review, and Update Beneficiaries
Having an up-to-date beneficiary is very important. Your beneficiary designations on life insurance, annuities, IRAs, wills, 401(k)s, trusts and anything else will determine to who those benefits will go to. If you have had recent life changes like divorce, marriage, births, deaths, etc., your beneficiaries need to be updated. An estate planner can help you with this.
Account Titling Review
As with your beneficiary, account titling should be reviewed and updated. If one partner dies and an account is titled only in their name, those assets can’t be accessed by the survivor. Joint accounts aren’t always a simple answer, so titling is important. Titling has impacts across a range of estate planning, as well as Medicaid eligibility and borrowing power too.
Now is a great time to review your portfolio. If one asset is appreciating but another is underperforming, your asset allocation may need to be updated. Review your current and ideal allocation and rebalance as needed. You may also want to consider if you are comfortable with your portfolio’s risk level, since risk tolerance is not static. Risk tolerance can change based on your age, net worth, financial goals, and income needs. A certified financial planner can be tremendous resource and advisor to help with asset allocation.
A certain amount of your assets should be set aside in cash accounts that are easily accessible. Your advisor can help you find the right balance for this. Remember that the cash portions of your brokerage and retirement accounts serve a difference purpose. These should not be included in your emergency reserve fund.
Many retirees have several sources of income. This includes Social Security, retirement portfolios, pensions, rental properties, inheritance, notes receivable, etc. You should consider each source and how secure it is. Can you really count on that inheritance? Are the notes receivable backed by collateral? Will rental property vacancies disturb your cash flow? If too much of your retirement income is from sources that are less-than-secure, you may need to reposition your assets.
If you have yet to retire, you need to go online and create an account with the Social Security Administration. The SSA doesn’t mail out individual statements anymore so to review your statement and ensure that your earnings have been recorded correctly, you will need access to the online account. You can also use the SSA’s online calculator to compute your benefits at various retirement ages. The SSA tools on the site are easy to use and very helpful in providing useful information you can use in your planning.
Is your retirement plan on track? If not, do you need to make changes? Remember to focus on more than just your asset’s value. Look at the types of assets you hold, what your contingency plans are, what your expected cash flow will be, what rate of return you’re assuming, and how long you are planning for it to support you. Make sure that all the moving parts of your retirement plan are being monitored.
Is your charitable giving tax efficient? Consider whether or not it makes sense to donate low-basis stocks in lieu of cash or learn about establishing a donor advised fund to take an upfront deduction for contributions made over the next several years. Give, by all means, but do so strategically to reduce your tax liability.
Check in With Your Advisor
By now, you should have a good idea of what your financial situation is, and which changes might need to be made. Your advisor can help you understand tax implications, balance your portfolio, set realistic goals for the future and more. Contact Argent Bridge Advisors today! Our team of advisors have the knowledge, experience, and skills to help you reach your financial goals.