It’s a New Year: Here’s a DIY Financial Plan Checklist
January 2, 2023 - It seems that everywhere you look – TV, internet, social media – there are ads for all manner of ways to improve your life in the coming year. While you may or may not have New Year’s resolutions, now is a good time to strengthen your financial plan so you are in control of your money. Here’s a list of some questions to ask yourself about topics like investments, estate planning, insurance and taxes:
First, do I need a financial planner?
Many people, with adequate time, interest, or knowledge, can go it alone without professional help, and many people benefit from consulting a professional. Click below to read more.
Now, onto the DIY financial planning list.
Tax Planning
Changes in tax laws in the last five years have made tax planning more complex than ever. While tax rates for wealthy families may be lower than they have been due to the Tax Cuts and Jobs Act of 2017, other new tax laws passed since then have created moving targets. From the SECURE Act to the CARES Act to the American Rescue Plan, it seems to have become the norm to pass at least one major tax law each year now. With tax brackets still at historic lows while government spending has hit new records the last few years, it may also be wise to plan on higher taxes in the near future. For families with charitable intent, pairing giving methods with tax planning is more important than ever.
While the estate and gift exemptions are higher than ever, will this last?
Is my tax plan sensitive to all these moving parts?
Am I prepared for significant tax law changes?
Am I managing my marginal tax bracket now and in the future?
Am I maximizing all tax savings opportunities available to me?
Am I tax-planning or tax-reacting?
Charitable Giving
Many people have charitable intent and are good at using tax deductions to leverage the value of their donations.
Am I giving as tax efficiently as possible (appreciated securities, qualified charitable donations)?
Am I leveraging my variable marginal tax bracket to my advantage by separating the donation from the deduction through a donor advised fund?
Am I bunching my deductions to maximize the increased standard deduction?
To read more about how the government can subsidize your charitable giving, click here.
Investments
Be sure you have a written investment plan so that your decisions are based on the plan, not on how you feel at any given time. The average investor’s return in the stock market since 1929 is much lower than the stock market itself, partially because of emotional reactions. This is especially the case when the market has significant volatility like the last few years or when there is a very rare circumstance like bonds and stocks both declining for the year, as they did in 2022, which is only the third time that has happened in the last 100 years.
What can I do to remove emotional reactions from my investment process?
Are my investments consistent with my objectives?
Do I know what my returns have been?
Do I have a defined plan for the next time there is an economic crash?
Do I know how much risk I am taking, and is it the right amount of risk?
Am I in agreement with my spouse about what we are invested in?
Do I have a process for vetting investment opportunities as they arise?
Are my investments tax efficient? Do I know my investment costs, and are they low enough?
Are my investments all managed in context so that they are not working against each other?
Budget(Schmudget)
Like counting calories, everyone likes to make a budget (said no one ever).
Is there a way to control my spending without a budget? (Hint – yes, check back here for an upcoming article about how – life happens too fast to “stick to a budget.”)
Am I sure my spending levels are not eroding my long-term plan?
Is there friction with my spouse about spending priorities?
Is there a simpler way to manage cash?
Estate Planning
It is easy to put this off. Comedian Steven Wright is quoted as saying, “I plan to live forever. So far so good.” Estate planning documents are foundational to a financial plan and need regular review. There are many stories of loose ends left undone, leaving difficulty and conflict for the next generation.
Are my documents up to date?
Do I know what is in my will?
Are my beneficiary designations up to date?
Does my trust language accomplish what I want?
Is my trustee the right person for the job?
Have there been family changes since my estate plan was last designed?
Insurance and Asset Protection
Insurance is an important tool that is sometimes mismatched with asset-protection needs.
Are there ways someone can take my wealth away from me or my heirs?
Do I have the right structure and the right insurance policies in place?
Do I have insurance products that were purchased out of context of my current situation?
Am I confident I have what I need as opposed to what I have been sold?
Debt: Is all debt bad debt?
With interest rates higher than they have been in a decade, am I using any low fixed-rate debt to my advantage?
Do I have a commitment to being debt-free?
Is my use of debt thoughtful and constructive?
When considering this year’s objectives, making it a priority to gain control of your plan could positively impact other decisions you make in 2023. Overwhelmed? Choose one thing to work on at a time and consider seeking help from a financial planner.
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Information presented is for educational purposes only and is not personalized investment, financial, legal, tax, or accounting advice. Nothing on this website should be interpreted to state or imply that past performance is an indication of future performance. All investments involve risk and unless otherwise stated are not guaranteed. Be sure to consult with tax, legal, accounting, and financial professionals about your specific situation before implementing any planning strategies. Investment Advisory Services offered through Timberchase Financial, LLC, a Registered Investment Adviser with the U.S. Securities & Exchange Commission. Registration does not imply a certain level of skill or training.