A Year-End Checklist and a Fresh Start

by Daryl Dagit
Savant Capital Management

Another year is coming to a close, which means it’s a perfect time to get your financial house in order. There are some important decisions that need to be made each year. The following checklist will help to ensure your year-end planning is a success. It will also help you make some financial resolutions for the new year.

Investments. Do you have your cost basis records updated on your non-retirement accounts? If so, is there any tax-loss harvesting that is available to you in your portfolio? Tax-loss harvesting is realizing losses to offset realized gains. Consider rebalancing the investments in all of your portfolios (both retirement and non-retirement accounts). Simplistically, rebalancing forces you to sell high and buy low.

Planning. When was the last time you reviewed your last will and testament and trust? Do you have a power of attorney in place for healthcare? Do you have a medical directive/living will? Do you have a durable power of attorney to handle your financial affairs if you cannot? When was the last time you made up a current list of all of your assets with current values? How are your assets titled? Is it time that you updated your estate plan?

Gifting. Would you and others benefit financially and emotionally by making gifts for 2011? Annual exclusion gifts or charitable gifts?

Retirement accounts. Are you maximizing your contributions? If not, could your contributions be increased for 2012? Are you already retired and over 71? Have you taken your required minimum distribution for 2011? This must be done by December 31st.

Clean-up. While you are getting all of the above in order, are there records and papers that could be thrown out? Reorganized? Can your loved ones find the needed paperwork if you are gone?

Once the work is done for 2011, let’s turn our attention to 2012. It’s a new year with a fresh start. You have the ability to make some changes and set some New Year’s resolutions that will help with your financial health and well-being. Below is our Top 10 list to get you off to a great start in 2012.

  1. Focus on friends and family. Absolutely do not forget what is most important, and devote more quality time to the ones you love. We tend to take out our frustrations and stress on those closest to us; make an effort to respect those around you.
  2. Stay healthy. With healthcare costs at an all-time high, staying healthy has never been more important. The obvious reason to stay healthy is your enjoyment of life. When you throw in the financial incentive, it makes you want to eat your vegetables and go for a walk.
  3. Stop spending more than you make. It is really very simple; if you spend more than you make, you will only accumulate debt instead of a nice nest egg for your future.
  4. Take control of your investments. Diversify and control investment expenses. Eliminate any conflicts of interest and take a holistic approach to your financial portfolio. Are you taking advantage of asset placement to benefit from tax laws? A financial advisor who is a true fiduciary can help with this.
  5. Realize that taxes matter…a lot. When analyzing your financial future, make sure you are looking at how taxes will impact you now and in the future. Make sure your portfolio is structured to lower your tax burden. 
  6. Don’t count on Social Security. Social Security benefits may or may not be around in the future, but one thing is certain—you will not cover all your living expenses with your monthly Social Security check. Save for retirement by using your company-sponsored plans and other savings vehicles. 
  7. Set up an automatic savings plan, if you don’t already have one. Even $5 a week is a fine place to start. 
  8. Be very aware of identity theft. Check your credit report on a regular basis. Don’t leave checks in the mailbox, and never respond to an email from anyone unless you are certain it is legitimate. Always shred your financial and personal documents.
  9. Review your contracts. Over the years, you keep paying your bills and never think about asking for a better price. This is common with your phone bills and cable bill. Your provider probably won’t call you out of the goodness of their heart to let you know that your service could be cheaper. Sometimes all you have to do is ask. 
  10. Simulate bad news. Similar to government agencies and corporations, run your own disaster simulation. Are you doing enough to prevent an emergency or life change from becoming a financial disaster? It’s a good time to evaluate your insurance levels and emergency fund. What is your family’s plan in the event of job loss, natural disaster, death or illness? This is a difficult situation to discuss and plan for, but it’s better to have a plan in place now to ease some of the pain during the actual emergency. You should have three to six months of expenses saved for an emergency fund.

Keep in mind that everyone needs estate planning unless you wish the State to do it for you. What better time than the present to get a jump on 2012 and start a program that will reward you for years to come and make sure your wishes will be carried out? New Year’s resolutions are never fun and are normally all on your shoulders to complete. Your financial advisor can easily help you on all of these items. Make this your year to get your financial house in order! Your family will be happy you did. iBi

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