Once again, the calendar has flipped to another New Year, filled with hope, excitement, and for many, resolutions to improve an aspect of their life. Too often these goals can feel daunting and unrealistic. Ask a local gym owner how many memberships they sell the first week of January every year. Therefore, I offer a dose of realistic, but important, top 10 financial resolutions to start your year off on the right foot!
#1 Take it to the Max- Whether you contribute to an employer 401(k) or an individual retirement plan, strive to put in the full maximums this year. Start by calculating what it would take to accomplish monthly, update your deferral amount, and get saving! The new 401(k) employee max contribution is $20,500 (plus $6,500 catch if over 50) with Traditional and Roth IRAs maxing this year at $6,000 ($7,000 if over 50). You will be amazed what a few years of hitting these figures will do for your retirement goals.
#2 Two Certainties in Life- Nobody wants to think of their own mortality, but I can assure you, from experience, leaving your loved ones with no instructions or guide is borderline cruel. Take this opportunity to either create, review, or update your will, trust, medical directives, and durable power of attorney. Also, life happens, children are born, folks get divorced or remarried, be sure to review your listed beneficiaries and if you have taxable accounts, consider a transfer on death designation. It's an easy (and free) way to direct assets and avoid probate. Finally, for those with minor children, be sure to name a guardian! Nobody wants to inherit a family like a Hollywood movie, where you find out at the funeral!
#3 Discipline is the Bridge between Goals and Accomplishments- Risk has been rewarded the past several years, whether it's stocks, cryptos, real estate, heck, even bonds had a good run for a while until 2021. A raging bull can derail even the best investor from their initial investment objectives and strategy. The new year offers a great opportunity to reassess your holdings and see if they still align with your overall goals. Also, do not be tempted to make your investments (especially those you may have added recently) align with your goals.
#4 Who needs it anyway?!- Life insurance policies can sometimes age like a banana left in the backseat of a car on a hot summer day. By the time you realize it’s still there, you’re not quite sure what to do with it. I’ve seen countless insurance policies that were purchased when children were young or mortgages were lofty, but after time, those polices, sometimes with hefty annual premiums age like that rotten banana. Make this the year to pull back that peel and look to see if it still makes sense to keep it around. New hybrid policies now exist that provide long term care benefits and if you have built up cash value, you may be able to take advantage of tax laws to efficiently swap for a policy that better fits your life stage.
#5 They grow up so fast- If you’re like me, you often ponder how your child has grown up in what seems like warp speed. If yours are in hyper drive and have begun accumulating college brochures, it may be time to also pay a visit to your college savings account. An aggressive design at age 3 when the time horizon still feels like, well, a horizon made sense, however; with the first year of tuition around the corner, you may want to reassess how much risk is in the portfolio. March of 2020 is not that far in the rearview, so let the fastest bear market in history serve as a reminder of how quickly the storm clouds can roll in the market. Avoid years of saving for college being derailed by forgetting to look at the risk being taken as your child nears their first year in school.
#6 Don’t look a Gift Horse- Whether you have given charitably for years or are starting to contemplate, a strong market has offered ample opportunity to begin donating to those most deserving of your philanthropy. There are also number advantageous avenues to help you make the most of your gifting dollars. Qualified Charitable Distributions from IRAs, Donor Advised Funds, or directing highly appreciated stock are just some of the more common ways in which to support your favorite charitable organizations.
#7 Reduce the Chip Stack- Year after year, my magic 8 ball continues to repeat the phrase “Reply hazy, try again” when I ask what this year’s market holds in store… perhaps I should order a new one? This resolution make appear similar to resolution #3 regarding discipline, but it differs slightly in that I’m suggesting the chip stack on the Blackjack table has been getting awfully tall the last few years and it may be wise to consider a slight reduction and put a few chips in your pocket. No one knows for certain what the market holds in the year ahead, but I can say what has happened in the market the last several years has provided a marvelous opportunity to lock in some gains.
#8 Love it or List it- There is no denying the relentless price increases within the real estate market over the past year or so. There is also no denying the conversations I have had through the years with many of the families we serve over the stress of caring for two homes. I have had several clients sell their second homes in recent years, either to move to their vacation home permanently or reduce the burden and stress of upkeep. I find it hard to imagine this market will keep its torrent pace and offer a better time to take advantage of selling a second home if the stress outweighs the joy.
#9 Keep it in the Family- Communication with loved ones can be difficult, especially over financial matters. If you have been putting off having conversations with your children, a spouse, or other loved ones about your finances, because you’re not sure how to start or what to say, make this a year of action and communication. I could write a book about the number of new families that approach our team for the first time unsure of their next move because of a lack of understanding of the family situation. Spouses that are unsure of account locations, passwords, intentions. Mix in blended families and it becomes even more complex, and sometimes contentious. You can prevent these roadblocks from occurring and at the same time, ensuring your legacy and values are shared for generations to come.
#10 Use it or Lose it- My last financial resolution for 2022 is directed at those who, much like me, have a hard time spending a dollar that has been saved. If you have worked and saved your entire life, I understand the reluctance and even paralysis that comes with spending money. We’ve all heard you cannot take it with you, so be sure to spend a little this year. Take a special trip with loved ones, make a memory or two, or that one purchase you dreamed of as a kid.
I realize some of these resolutions may require some serious consideration and possibly professional advice. These are just some of the conversations and topics we discuss with regularity with the families we serve. We welcome the opportunity to speak with you and see how we may be able to assist you with your financial matters. Feel free to navigate to our Contact Us Page and schedule a complimentary meeting.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Matthew Spradlin and not necessarily those of Raymond James.