Start the new year right by setting healthy habits that can help positively impact your financial plan.
1. Budget…And Find a Way to Stick to It!
We understand that, typically, NO ONE likes to budget. Because of this, it causes even the most disciplined to sometimes stray from their plan. Find an app or resource that allows your budget to be integrated into your spending. Assign dollars to your various expense categories, while also maintaining flexibility to account for things like healthcare that can’t be pinned down precisely.
2. Evaluate Cash Holdings/Prepare for Emergencies
A certain amount of assets should be set aside in cash accounts that can be readily accessed in case of emergencies—talk with your advisor about whether your current allocation strikes the right balance.
3. Rebalance Your Investment Portfolio
In 2020, we experienced significant stock market volatility, which caused appreciation in some asset classes and underperformance in others. This resulted in portfolios being more or less aggressive than originally intended. Revisit your current and ideal asset allocation at least annually and rebalance as needed.
4. Work to Maximize Contributions to “Tax-Shelters” for Retirement Savings
The IRS provides several tax-preferred accounts for retirement savings. Some of these include 401k, IRA and Roth IRA. Working to increase or maximize savings into these vehicles will allow for greater potential taxes saved and a higher chance of more efficient investment growth over time.
5. Contribute to an HSA
Individuals that participate in a High Deductible Health Plan through work may be able to contribute to a Health Savings account. All savings and investment growth within this type of account are tax-free if used for qualified medical expenses. It is one of the only “double tax-breaks” offered by the IRS!
6. Check Whether Your Retirement Plan is on Track
What changes are needed given your current lifestyle? Don’t fixate solely on your retirement assets’ value—instead, drill down into what types of assets you hold, what your expected cash flow will be and any contingencies in place. Retirement plans have many moving parts that should be reviewed on an ongoing basis.
7. Read Your Estate Plan
That’s right, we recommend annually reviewing these documents. Set aside a night to read through with your spouse while watching TV. Because life and desires change, and if left unattended, an incomplete or outdated estate plan can be overwhelming for your loved-ones. If questions arise or you feel changes are necessary, discuss with your financial professional and estate attorney. They can review to make sure things like asset titling and beneficiary designations are up to date as well.
Got questions? Contact the Purifoy Wealth Team today!
*This article was written by Michael J. Purifoy, CPA, CFP®, Executive Vice President, Southwestern Investment Group and Wealth Advisor, RJFS
