New Year Financial Checklist: Are You Set Up For Success?

Jon McGraw • Jan 22, 2020

2020 is here, and it’s here to stay! While there are many new year resolutions flying around this time of year, perhaps the most important is getting your finances in order. Now is the time for a financial strategy wellness check to ensure you and your family are set up for financial success for years to come.

At Buttonwood, we dive deeper into comprehensive financial strategies with our clients than others. We do this because we know scratching the surface of financial strategy doesn’t provide accurate, actionable opportunities. As we move further into 2020, the following is a list of items we recommend adding to your checklist.

1. How to get where you want to go

Years ago, you likely determined what you want out of life. As years progress, your vision has probably changed. It’s important for your financial team to know the details so your strategy can reflect those changes. If you are not currently working with a financial advisor, the Buttonwood Team proactively implements financial strategy based on changes in your life on a real-time basis.

2. What to do with the extra money in your checkbook

The first couple of months of a new year is the perfect time to think about your spending! When there is more money coming in than going out, exciting opportunities present themselves. From simple things like shifting from traditional bank accounts to a cash management strategy including CDs and T-Bills , you can more than double your rate of return. Beyond your paycheck, what other income streams are contributing to your monthly cash flows? Perhaps you have real estate generating income, or maybe it’s your side-gig that’s bringing in the extra cash. Regardless, it’s important to capture and compare to your list of expenses.

By comparing income vs expenses, you will have a strong understanding of what amount can be allocated to further savings. For example, you may be able to contribute more to your retirement accounts, or even to your younger generations’ 529 accounts. From there, it’s important to work with your financial advisor / Family CFO to create and implement a plan that meets your goals. Keep in mind, you’ll want to talk to your financial professional about the tax implications and savings opportunities that come with contributing to different accounts.

3. How to reduce your tax bill and increase retirement income

Take a good look at your retirement plan contributions. Can you contribute more in 2020 than you have previously? The earlier you save, the more your financial nest egg will increase. Additionally, if you are 50 years old or above, start making catch-up contributions ! This is a great opportunity to contribute above the regular limit and continue to build up your retirement savings.

Part of our role as Family CFO includes a comprehensive strategy based around your retirement contributions and your tax strategy. Once you start contributing to a handful of retirement accounts, it’s imperative to keep your tax strategy top of mind. There are many strategies we implement for our clients to ensure tax savings opportunities are optimized, contact us to learn more.

4. Who controls your assets?

A lot can happen over the course of a year; both good and bad. You’ve likely experienced a change or two since you last adjusted your estate documents and the new year is a great time to review!

The most common mistakes we see with estate documents is incorrect titling and beneficiary designation. An integral piece of your estate plan is ensuring that your assets are titled to the correct entity and beneficiaries are adjusted after major life events such as: death of a beneficiary, divorce, marriage, or the birth of a child.

5. Changes in tax & estate laws impact you

You’ve likely heard about the SECURE Act being signed into law, but do you know how this directly impacts you? With many opinions and strategies being tossed around, it can be difficult to know what it all really means. Keep a close eye on our blog in the coming days for updates!

6. Are you comfortable with a 50% loss in your investments?

Are you taking on more risk than you need to be? While we’re in one of the longest economic cycles we’ve seen, history proves our economy will continue to go through up and down cycles. We’ve seen investors take much more risk than needed due to recency bias. Essentially, this means people tend to think what they are living through right now, will continue into the future.

When thinking about investments, you should pair your allocation with where you are in life now and when you actually need the money. If the market were to fall in 2020 as much as it went up in 2019, would you be okay with the outcome?

7. Protect your assets and your income

Insurance may be one of those items that falls by the wayside, especially if you haven’t had to make any recent claims. We recommend a full review of your insurance policies to ensure you are covered in the event of an unexpected occurrence.

Life Insurance

Annually, look back on the previous year. Review your roles and responsibilities and how they have changed. Whether a new baby or an elderly parent moving into the spare room, you’ll want to increase your life insurance to ensure your dependents are taken care of in the event of the unexpected.

Home & Auto

It can be easy to forget about reviewing home & auto policies, but an annual check-in can save you in the long run. When reviewing auto policies, be sure you have sufficient coverage for all drivers, not only yourself. You may have a new driver on your policy, which means it’s time to increase your coverage. It’s also important to think about your driving habits and what the upcoming year entails. If you are planning a long road trip, now may be a good time to increase coverage!

Even if you haven’t made any major changes or improvements to your home, we still recommend regular review of your homeowner’s policy. If 2019 was unlucky for your home, you may have seen flooding, wind damage, hail damage or damage due to large amounts of snow and ice. These are all events your insurance agent and Family CFO should know about sooner rather than later.

Disability & Long-Term Care

Through our years of experience, we’ve found disability and long-term care (LTC) insurance can save thousands of dollars later in life. Some people are wary to pay into LTC insurance for fear of paying for something they’ll never use. However, if you choose not to pay for LTC, you could quickly run out of money in retirement after just a few years of care. If you are interested in learning more about LTC and how it can tie into your financial life, contact us today.

Disability insurance is another policy which often gets pushed aside. No one ever plans for an accident or illness, but disability insurance ensures you still have income in case you are unable to work for an extended period of time. Young workers especially miss this policy because they never think it could happen to them. “More than one in four 20-year-olds will experience a disability for 90 days or more before they reach 67,” says Carol Harnett, President of the Council for Disability Awareness.

8. Protect Your Credit Score

It’s 2020 and potential fraud is more of a concern than it’s ever been. At Buttonwood, we take the position that odds are, ALL of us have had our information stolen. It is now just a matter of time until the thieves try to use the data. Rather than trying to defend against something we have no control over, we recommend a proactive approach to monitoring the situation. This will allow you to jump on any adverse conditions. At the very least, you should monitor your credit with a free site such as Annual Credit Report. The next step would be to use a more proactive service like Credit Karma. The next level is to add a paid service like Life Lock. It’s unfortunate that these things happen, but with a proactive approach, you can stay in front of potential misused of your data.

9. Limit Your Risk

What are your assets doing for you? Could they be doing more? You may be able to limit risk to your balance sheet by using pledged asset accounts. In today’s world, so many dollars are spent chasing opportunities. Let 2020 be the year you step out of your box and take advantage of creative financing! This includes various ways to work with your assets and your liabilities. For example, you may choose to pay off high-interest credit card debt with a home equity loan. An even deeper example would be owning and operating a business or real estate venture. Obtaining a loan can be tricky. Even with a good credit history, you will likely have to personally guarantee any loan with your own balance sheet. Instead, you could use a pledged asset account against a portion of your investment portfolio, providing significantly lower risk to pursue your next project.

Family CFO Coordinating Your Financial Life

While all of this can be stressful and overwhelming, we stand ready to assist! At Buttonwood, we know as wealth builds, life doesn’t get simpler; it becomes more complex. Having wealth doesn’t mean much when you don’t have the time to enjoy it with your loved ones. As Family CFO, we work with you to create your comprehensive financial strategy based around tax, insurance, estate, investment, cash flow, retirement, education, business, etc. Once we’ve customized your strategy to meet your goals, we will implement so you can spend your free time enjoying life.

If you are interested in learning how your own Family CFO can benefit you and your family, contact us today for an informal conversation.

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