Personal Finance is an ongoing process. This is not a one-time project but instead a continuum that is constantly changing and needs to be reviewed, updated and adjusted. Many things can get you off target and having a process will help to keep it on track. If we break our finances into 12 monthly steps, we often find it easier than trying to handle everything at once.
Working with a financial advisor provides a professional to discuss this with and ask questions as they arise.
January – Budgeting
Reviewing your household budget means getting a full understanding of your income, expenses and savings. It doesn’t need to be too formal a process, though it’s important to find tools that work best for you. This could be using a budgeting app, downloading a template, maintaining a spreadsheet or simply using pen and paper. Automate your savings. Make it a habit to review throughout the year.
February – Debt Management
According to LendingTree, the average credit card interest rate in America is currently 24.43%. Though this has been decreasing, it is still a staggering percentage. If you have credit card debt, develop a strategy to pay it off as quickly as possible and reduce the interest rate paid. Consider consolidating or refinancing to lower your rates if possible. Some cards will even decrease the interest rate just by calling, so it’s worth a try.
March – Taxes
As April 15th approaches, it is time to organize your tax documents and review your tax picture. Your accountant and financial advisor may be able to help provide tax-saving strategies. The government is continually changing the tax code and staying up to date can provide additional savings opportunities. We recommend sharing your tax information with your financial advisor as your tax bracket often goes hand-in-hand with your investment strategy.
April – Credit Report Review
You might be vigilant about paying your bills on time and maintaining a low credit utilization level, but if your personal data is hacked and used without your knowledge, it can seriously affect your score. You are allowed by law to see your information annually, for free, and this type of self-inquiry will not affect your credit scores. With three separate credit bureaus gathering information about you, there is also potential for errors or incorrect information to be included. By reviewing each of your reports, you can ensure they are accurate and work to correct any errors.
May – Budgeting Review
Review your year-to-date income and expenses as compared to the budget you created for yourself for the year. Are you on target? What changes do you need to make? Are you on track with your retirement contributions/ withdrawals? Are your tax withholdings and quarterly estimates on target? Now is a good time to adjust as needed.
June – Insurance Review
Check your insurance policies (property and casualty, liability, health, disability, long-term care, life) to make sure your levels of coverage are appropriate. Surprises can happen at any time, from car accidents, house fires, illnesses, disability, natural disasters, or death, and your insurance policies help protect against these unforeseen events. Create an inventory of your home and personal property for insurance purposes by using your cellphone to take a video while walking around your home. Check your health insurance’s open enrollment period and make a note on your calendar to review your health insurance again during that time.
July – Asset Allocation
As all your June 30 investment statements are received, it’s time to take a look at the whole picture. Are you overallocated to any specific stocks or sectors? Should you be rebalancing? Review with your financial advisor in order to more fully understand the big picture.
August – Cash Management
Many banks and money market funds are paying competitive interest rates. Ensure your cash is invested at an appropriate interest rate. In addition, ensure that your emergency fund contains appropriately three to six months’ worth of essential living expenses.
September – Financial Education
Back-to-school time is a good time to brush up on a finance topic that you wish to learn more about. Find a book, podcast or possibly a course that will provide you with some new knowledge to enhance your financial understanding.
October – Estate Plan Review
Life changes over the course of a year may require updates to important documents such as wills, health care proxies, beneficiary designations and powers of attorney. Verify that your wishes are reflected in your legal documents and update if needed.
November – Charitable Giving Strategies
Review your charitable giving for the year and consider making tax-deductible gifts to charity or a donor advised fund account before the end of the year. Consider if gifts of appreciated stock are appropriate. If you are over age 70 ½, consider making Qualified Charitable Distributions (QCDs) directly from your IRA. Work with your financial advisor or accountant to determine which charitable giving strategies are right for you.
December – Year-End Tax Planning & Gifting
There’s a lot to review in December:
- Run a projection of your current-year income tax liability to see if you are on target with your taxes or if additional tax payments are needed
- Consider tax-loss harvesting
- If you are taking RMDs (required minimum distributions) from retirement plans, verify you have taken the appropriate amount.
- If you make annual gifts to family members, now is a good time to review what has been gifted already and if you wish to make additional gifts prior to year-end.
- Contributions to 529 plans also have a calendar year deadline.
There are so many items to think about during the year. By breaking this into smaller pieces, it helps to cover your financial picture without getting overwhelmed. Please give us a call with any questions you may have.
