Instead of hauling out those familiar New Year's resolutions about eating less and exercising more, how about focusing on something that's also very good for you in the long run. We're talking about your financial plan - your fiscal health, if you will. The start of a new year is a great time to review your plan and make any necessary revisions. With that in mind, here are 12 suggested resolutions that, if followed, can help ensure your later years will be financially secure.
- Get your balance sheet in order
Using December 31st as the effective date, update your personal balance sheet. Having a score sheet of where you are financially will help you reach important financial goals.
- Review your budget and spending habits
How close did you come to what you had planned to spend last year? Where did you go off track, and what can you do about that? Has something fundamental changed in your life that affected your expenses, and is that a one-time item or an ongoing cost? Where can you trim expenses? Although some budget items are fixed, a sharp pencil can produce significant savings on other costs.
- Review the titling of your accounts
Account titling often occurs haphazardly - an individual opens a bank or brokerage account, meets Mister or Miss Right, they live together or get married and...down the line there's a problem. If one partner dies and that bank or brokerage account is still titled only in the original holder's name, those assets can't be readily accessed by the survivor. Take the time to review your account titling and determine if there's still arrangements to be made.
- Designate and update your beneficiaries
If you don't correctly document and update your beneficiary designations, who gets what may be determined not according to your wishes, but by federal or stat law, or by the default plan document used in your retirement accounts.
- Evaluate your cash holdings
Everyone should try to have a certain amount of their assets - usually three or more months of living expenses - set aside in cash accounts that can be quickly and easily accessed. The cash portions of your brokerage and/or retirement accounts serve a different purpose and shouldn't be counted as emergency reserves. Think about where your cash reserves are located and evaluate if that is the best place for your funds.
- Revisit your portfolio's asset allocation
The ups and downs of the market will affect your asset allocation over time. Appreciation in one asset class or underperformance in another can leave your portfolio with an asset allocation and risk profile that differs from what you originally intended. It's important to revisit both your current and ideal asset allocation at least annually and rebalance as needed.
- Evaluate your sources of retirement income
Most retirees have several sources of income such as Social Security, pension(s), retirement portfolios, rental properties, notes receivable, inheritances, etc. Every individual picture is different. Think about how secure each source is. Can you really count on that inheritance, are there likely to be vacancies in your properties that would interrupt the cash flow, are the notes receivable backed up by collateral? If too much of your retirement income is from sources you consider less than solid, it may be time to reposition your assets.
- Review your Social Security statement
If you're not yet retired, you need to go online and establish an account with the Social Security Administration - the SSA isn't going to be sending individual statements of accrued benefits in the mail anymore. Review your statement, and be sure all your earnings over the years have been recorded. Use the SSA's online calculator to compute your benefits at various retirement ages.
- Review the tax efficiency of your charitable giving
Think strategically about your contributions - donate low-basis stocks rather than cash, for example. Consider establishing a Donor-Advised Fund, which enables you to take an upfront deduction next year for contributions made over the next several years - and provides other benefits. Give, but do so with any eye toward reducing your tax liability.
- Check to see if your retirement plan is on track
Many investors have delayed their retirement plans for various reasons. The important thing is to respond and determine - promptly and realistically - what changes might be needed given your current lifestyle and market environment. The truth is that retirement has a lot of moving parts that must be monitored and managed on an ongoing basis.
- Make the indicated changes
By now you should have a good idea of where you stand overall, what your cash flow situation is, what your retirement income pictures looks like, and where the shortfalls or other challenges are. With a clear picture of financial health, go after any problem areas - or opportunities - systematically and promptly.
- Set up a regular review schedule with your financial advisor
Your advisor can help you with specialized tools, with impartiality, and with the experience earned by dealing with many market cycles and many different client situations. Establish a regular schedule to get together and review your portfolio, your financial and retirement plan, and what's happening in your life.
This article originally appeared on RaymondJames.com.