Does Your Financial Plan Need Attention? Try This

The BAM ALLIANCE, 2/4/2020

Another spin on New Year’s resolutions? Now? Well, it turns out the topic is more appropriate than it initially might seem, given that most people have already abandoned the commitments they made to themselves when the calendar turned. One frequently cited figure is that some 80% of such promises to eat better, hit the gym, or write a screenplay fail by the middle of February.

This may sound discouraging, since surely we all have certain habits that we wish we could change and important goals that we want to reach. Who doesn’t want to make healthier lifestyle choices? Who doesn’t want to live their values more fully? Who doesn’t want to be financially secure and make good decisions with money?

Fortunately, developing positive habits and successfully making personal change is a learned skill, and you improve at it as you keep trying. It rarely happens as a single, one-time event – even if we tend to view it that way. (Perhaps that explains the apparently terrible success rate of New Year’s resolutions.) Rather, this kind of meaningful work occurs gradually over time. It requires nurturing.

In other words, it’s a process that you accomplish in steps, much like your long-term financial plan.

So, if you happen to be on the verge of abandoning your New Year’s resolution right around now, consider this a gentle prod to get back on track. Begin with incremental adjustments. Remember, a temporary slip doesn’t have to become permanent failure, and in this case self-reliance is more vice than virtue.

If it’s really progress toward your financial goals for this year and beyond that requires attention, February is a perfect time to address the following with your wealth advisor.

Annual planning to-do items left over from January. Been meaning to increase those retirement plan contributions? Work on a new saving and spending plan? Revisit your charitable giving strategy a little earlier in the year? Confirm your asset allocation remains in line with your willingness, ability and need to take risk? No time like the present.

The SECURE Act and how it may affect your financial plan. The recently passed retirement law touches a host of areas, from annuities in 401(k) plans, to an increase in the Required Minimum Distribution (RMD) age and the elimination of the maximum age for traditional IRA contributions, to new rules around inherited retirement accounts and modifications to the stretch IRA (which in turn affects trusts named as IRA beneficiaries). While there are still unanswered questions about the law and its implications, now is a good time to begin discussing proactive planning opportunities with your wealth advisor and estate planning attorney.

Getting a jump on income tax preparation. Have your life or financial circumstances changed in a way that would alter your income tax situation? Your W-2s and 1099s are probably already arriving, which means it’s time to start compiling your tax documents. Put aside what’s coming in the mail (or via email), but also start collecting receipts and records that you stored away over the course of last year. Getting this information together early will help paint a more complete picture of your tax situation, as well as give your tax professional and wealth advisor more time to explore filing strategies and look for savings. There may be some steps you can still take now to reduce your tax bill come April.

Even if the desire to accomplish a goal is there, initiating or following through on it can be much harder than it might seem. Maybe the culprit is fear. Maybe it’s inertia. Or maybe it’s the risk we perceive in reexamining a lifestyle that’s become part of our routine and comfortable.

To help overcome this obstacle and turn your best intentions – or your deepest-held financial values – into reality, envision what you’re working toward. Doing so will help bring the rewards of that effort out of the distant future and into your present life.

Hopefully, this exercise also lends your February planning conversations a new sense of perspective and purpose. Build on that. Reach out to your advisory team – whether the matter at hand is big or small, in these areas or any others – and maintain momentum toward the goals you’ve set.

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