Every Saturday morning, my son and I go for a golf cart ride around the neighborhood. Recently, we’ve been able to stop by Delray Beach’s 100-foot Christmas tree and walk around the GreenMarket. We have no agenda or plan while we are out cruising; we are simply enjoying our time together.
While our time together is relaxing, not to mention precious, it doesn’t mean that I don’t plan ahead so the ride is smooth. I charge the golf cart the night before. I pack his breakfast that morning — he loves eating Cheerios and granola bars. I make sure I have the diaper bag, and I of course bring a speaker so we can listen to music as we meander.
Planning allows us to enjoy hours of uninterrupted time together. This new year, and the start of a new decade, can also be a time of uninterrupted growth, both in your professional and personal life. Let’s take some time up front to make the next year a seamless experience for you and your loved ones.
Here are five quick financial resolutions you can make now in the new year to jump-start healthy financial habits and get you back to living the life you truly want to live.
1. Make a Spending and Savings Plan
There is power in how things are labeled. Since “budgeting” has such a negative connotation, let’s change the name and start making our “spending and savings plan” for 2020.
The first, and easiest, step is to plug your accounts into a secure portal so you can quickly classify your transactions. This way, you know where your money goes at the transaction, merchant, and category levels.
With a better view on your outflows, you can start labeling certain items as “core” and “discretionary” to find areas to prune to boost your savings. Rent or mortgage payment? Definitely core. Your tenth TV subscription? Discretionary. That gym membership? Depends!
Identifying your core and discretionary expenses doesn’t mean having to live frugally and unhappily — it’s about figuring out what expenses are essential for your health and security. If a gym membership is necessary for your mental health, that can be considered core for you.
2. Review Your Investments
US equity markets have had a stellar run upward since the lows of March 2009. Hopefully you’ve been able to enjoy the ride by contributing the max to your company retirement account and buttressing that with after-tax savings. But what does this bull market mean for your overall investment portfolio?
It’s important to review your equity and fixed income allocations to make sure they are in line with how much risk you can take, both financially and behaviorally. Without periodically rebalancing your accounts, the amount of your savings dedicated to equities has likely grown over the past decade. Is this in line with your needs and your investment horizon?
Another overlooked aspect of your investments is understanding what you are paying in fees: How much does your plan charge to administer the program? What are the expense ratios of the underlying funds? How much are you paying without even knowing?
3. Monitor Your Credit
In today’s all-digital environment, we must remain vigilant around the privacy and security of our important personal data, including our financial information. It’s unfortunate but often times highly personal data can leak out into the public. This can lead to nightmare scenarios of identity and financial theft.
In order to circumvent these issues, there are two great steps to take. The first is to consistently monitor your financial accounts, including your credit cards. You can quickly cancel a card or dispute charges if incorrect or fraudulent activity appears.
The second is to consider placing a freeze on your credit accounts so no new financial accounts can be opened in your name. This is a more involved process, unfortunately, but it’s the only way to prevent credit fraud. Don’t worry — you can always temporarily pause the freeze when you need to take out a loan or apply for a new card.
4. Update Your Estate Plan
It’s amazing looking back over the past few years and seeing just how much my life has changed. I imagine it’s the same for you and your family. Has your estate plan kept up with all of the changes you’ve experienced?
Make sure you have at least the basics of an estate plan in place — a will, health care directives, the appropriate powers of attorney, and potential trust structures — and that they are up-to-date. There is a lot to consider, and the law is complicated in the arena, so consult with a trusted estate attorney to make sure all your bases are covered.
Additionally, don’t forget to review the beneficiary designations on your financial accounts. This is an easy but often overlooked step since many assume a will covers this. It will not. Financial accounts like IRAs and 401(k)s pass outside of probate and are directed to the designated beneficiaries on file, or the beneficiary waterfall of the custodial or plan sponsor. This simple step can save many headaches down the line.
5. Understand Your Insurance
You spend most of your waking hours working to provide a wonderful life for you and your family. No one likes contemplating the unthinkable scenario of a disruptive loss, but it’s crucial that you protect your assets and income.
Understanding your insurance needs and obtaining proper and complete coverage is an individualized process, so please consult with a licensed professional who will clearly explain the terms and costs of all of the policies you may need.
Agile Financial Planning at Harbor Crest Wealth Advisors
There’s a lot to do to build a better financial life, and it’s easy to get discouraged by all of the decisions that have to be made. But you don’t need to make them all in a day!
At Harbor Crest Wealth Advisors, we promote agile financial planning, meaning we work with clients to solve problems one at a time, iterating on the process over months and years. This allows them to work on bite-sized pieces, get some financial wins under their belt, and consistently build toward the ideal financial life that fits them.
Remember, Rome wasn’t built in a day, but they were laying bricks every hour.
If you would like help defining your goals and organizing your finances for 2020, please feel free to give Harbor Crest Wealth Advisors’ goal planning tools a try.