Before you start decorating your Christmas trees and popping champagne bottles for the New Year, don’t forget to check-up on your financial health using a financial checklist. Did your net worth increase? Which investments performed the best? Most importantly—how does it all tie into your master plan for the future?
If this is your first time doing a financial review, take your time to learn some of the building blocks that make up your financial health. It will certainly get easier every year, once you nail the basics. For the financially savvy familiar with a financial review, it shouldn’t take you too long to run through the list—so let’s get started!
Review Your Cash Flow
The purpose of reviewing your cash flow is to know exactly how much money is coming in and going out, while also forecasting large expenses that you may be planning for in the future.
❏ Identify all sources of current income (career & side-hustles)
❏ Track & organize all expenses, monthly and annually
❏ Consider boosting your savings by cutting cable TV, entertainment accounts (Netflix, Hulu, Spotify, etc.) and changing mobile carriers
❏ Evaluate trends or expected changes to current income and expenses (child’s education, aging parent’s care, etc.)
❏ Identify any large expenses planned for next year
❏ Establish or tune-up an emergency fund
Review Your Investment Goals
Investing is a very broad landscape and can be at times overwhelming. What’s working for someone else may not work for your unique situation, thus it’s good practice to always reevaluate and stay on top of your ever-changing needs. While reviewing your portfolio and rebalancing your investments, it’s important that you remember to factor in how selling off assets may affect your tax liability.
❏ Evaluate your current investments compared to your written investment objectives
❏ Rebalance your portfolio according to your changing risk tolerance
❏ Meet with your investment adviser or manager to evaluate your financial plan; prepare a list of topics to focus your discussion
❏ Consider using other high interest investment accounts to grow your cash or funds (CDs, High Yield Savings, etc.)
❏ Look for refinancing opportunities that could lower your mortgage payments
❏ Check your credit report for any credit fraud; if looking to improve your credit score for an upcoming loan, plan to exercise best practices.
If you’re ready to take your investments to the next level, check out our Guided Wealth Portfolio —DECU’s new online investment platform that combines the benefits of a personal financial advisor with sophisticated technology. For additional help with your investments, DECU Investment & Retirement Services offers a complete investment and retirement roadmap to help you achieve your financial goals.
Planning For Your Retirement
Retirement goes hand-in-hand with reviewing your cash flow and investments. For example, if you’re on top of your expenses and rate of returns, planning for your retirement will be much simpler because you will know exactly the amount you need to sustain your lifestyle during retirement. You could also then figure out your exact retirement date. How exciting is that?!
❏ Review target date for retirement & amount of income needed
❏ Evaluate your strategy to reach your retirement objective
❏ If you are older than 70 ½, take your Required Minimum Distribution (RMD)
❏ Consider whether a Roth or Traditional IRA makes sense for you
❏ Roll-over your old 401(k) accounts from previous employers
Be patient and take the time to understand your tax liability. Taxes can seem overwhelming. Take advantage of the numerous tax benefits you could implement and incorporate to your overall financial portfolio.
❏ Identify any actions to reduce taxes; speak with a CPA to identify tax benefits
❏ Evaluate and maximize 401(k), IRA or other retirement plan contributions. If you are over 50 years of age, take advantage of increased catch-up contribution limits.
❏ Monitor tax loss carry-forwards and consider harvesting losses to offset gains
❏ Plan charitable contributions—direct gifts, indirect gifts, split-interest gifts
❏ Consider a Qualified Charitable Distribution (QCD) from your IRA—up to $100,000
❏ Plan tax-free gifting—up to $14,000 per individual per year ($28,000 for married couples)
❏ Consider using tax-free gifts to fund/contribute to a 529 plan
Review Your Insurance Plans
Be prepared for the unexpected. Many things change as we get older and potentially encounter health issues. Take into consideration the well-being of your dependents, parents and elders.
❏ Review your Health Savings Accounts contribution
❏ Check to see whether your Flexible Spending Account has a carry-forward option or if you must use it or lose it.
❏ Review your homeowner’s insurance; if you rent, strongly consider adding renter’s insurance.
❏ Evaluate the need for an umbrella policy
❏ Review your deductibles and look out for more efficient options with the same coverage
❏ Review your long-term care and disability income insurance to determine if they continue to efficiently meet your coverage needs
❏ Review your life insurance policies and estimate future health care costs of elders
DECU offers Insurance Services to our members from health to home insurance. For your free, no obligation quote, please click here or call us at 844-578-5566.
To round it all off at the end of your financial checklist, take some time to review your estate documents. Your estate represents the culmination of all the hard work and sacrifice you’ve made your entire life, and to make it all worthwhile, think of how you’d want your assets to be passed on to the next generation.
❏ Determine ownership of assets (including real estate) and beneficiary designation
❏ Take note of where your estate planning documents (wills, trusts, durable power of attorney, etc.) are located
❏ Review estate planning documents to make sure they are accurate and current
Financial reviews don’t have to take a lot of time and can actually be fun to discuss as a family. Looking back over the years at how far you’ve come and the progress you’ve made is one of the most satisfying feelings you can experience. The small steps that you’ve taken are now starting to form a larger picture that brings you closer towards your retirement and investment goals. Whether it be enriching your life, your family or your community, make it a habit to take an hour or two at the end of each year to review and plan for the coming year.