Navigating the Year in Personal Finance

Personal finance is an ongoing journey. We all go through periods that we are more motivated to make changes or act on something. That is not always a bad thing. It is to your benefit to be active in your planning process. The problem is, we have a tendency to get bogged down by the mountain of tasks, the long list of “to-dos” – it’s like drinking water from a fire-hydrant. I don’t think that works out super well… If you get too focused on the destination, you miss the little parts of the journey that make a difference.

Part of the reason I write this blog is because posting quick tips on social media (although helpful and convenient), really doesn’t give you a holistic view of what needs to be accomplished and when.

So, let’s talk about what a solid plan looks like. It's about making informed decisions to manage your money effectively and achieve your financial goals. It’s about breaking up the tasks into the little things, taking each detail one at a time. I know, easy, right?

Of course, looking at this as an entire list is overwhelming. That is why we break it down into manageable chunks. Not everything has to be done right away. With that being said, let’s talk about what a year in personal finance may look like for you – what to do to approach the next 12 months.

1^st Quarter: Starting Fresh – Organization:

Personally, I like to think of the first quarter as a new beginning. I know, I know, resolutions don’t always last as long as we want them to.

Nonetheless, let’s start making progress where we can this year. Admittedly, this does require a little forethought. 4^th quarter of the prior year is partially about planning, so if you want to get ahead of the game, skip down to the 4^th quarter, and then come back up here.

So, where were we? Action Items. We all like action items. So, here are a few ideas to get you started in Q1:

• Revisit your prior year contributions to your retirement accounts. If you need to make up the remaining amount of the maximum allowable contributions, now is the time. Remember, you can still make those extra additions for the prior tax year up until the tax deadline.
• Pay Yourself: Prioritize retirement savings by contributing to your company’s retirement plan and increasing your 401(k) contributions. You may even be able to set this up to automatically increase dependent upon your plan and your income… Just something to keep in mind.
• Tax Time Preparation: April is sooner than you think. Start gathering your tax documents early to avoid last-minute stress. Organize your receipts, invoices, and other relevant paperwork and consult your accountant!
• Benefits Whiz: Become an expert on your company’s retirement plans. Understand the contribution limits, vesting schedules, and investment options. Also, take a look at your health spending… evaluate your health insurance plan and maximize your benefits. Understanding deductibles, copayments, and out-of-pocket limits is difficult – take it one at a time. HSAs are great vehicles, use them to your advantage.

2^nd Quarter: Refresh & Renew – Consolidate:

Think of this as “spring cleaning” – it is time to regroup, ditch what didn’t work last year, and get back to square one by starting good habits. The first quarter is all about organization. The second is about making sure that you are acting on what you need to change.

• Mind Your RMDs: Understand the new Secure 2.0 rules regarding Required Minimum Distributions (RMDs). Take a look at this article for more information.
• Portfolio Optimization: Reviewing your investment portfolio with your financial advisor to ensure it aligns with your risk tolerance and financial goals is a great way to plan out the rest of the year. Advisors will ask if there are any upcoming major purchases or expenses and plan accordingly.
• Cashflow Review: We have talked about budgeting in several previous blog posts. Did you start a new budget at the beginning of the year? More importantly, is it working? Analyzing your cash flow can help you identify areas for improvement and potential spending leaks.
• Credit Check: This area is often missed by financial advisors. But the spring is a good time to get a better understanding of your credit report. You can figure out where you are, what you need to do to improve, and be able to make changes heading into the summer.

3^rd Quarter: Bright Days & Brighter Ideas – Looking Ahead:

Now that we have cleaned out and established good habits, it’s time to look ahead. What do we have coming down the pipeline? What do we want to plan for?

• Estate Plan Check-Up: Review your estate planning documents, including your will, trusts, and beneficiary designations, to ensure they reflect your current wishes. If you are not there yet, it may be time to talk to a professional. Remember, it’s the little things along the way that will make a huge impact. Make sure you are working with someone you trust.
• Legacy Planning Conversation: If needed, initiate discussions with your family about your legacy planning goals, including values, traditions, and future aspirations. – This is a great time to start planning for those charitable contributions at the end of the year (Or QCDs – What’s a QCD? – I am glad you asked – Link).
• Financial Team Check-In: It is around this time that I schedule annual reviews for many of my clients. Making sure we have end of the year items planned out, conduct our formal reviews. It is a time that you can let us know of any significant life changes, such as job changes, family additions, or inheritance – anything that we need to add into your plan.
• College Tuition or Application Deadlines: Stay updated on college application and tuition deadlines and financial aid requirements for your children or dependents.
• Holidays: It really may not be too early to start planning for the spending of the holidays. Putting away a little extra money each month can help you have a little extra for the holidays.

4^th Quarter: A Plentiful Year – Celebrate & Plan:

The 4^th Quarter is probably the most chaotic. Everyone is scrambling to shop for the holidays, plan for those family reunions, and wrap up those year-end responsibilities. Advisors are doing the same: sending out RMDs, making charitable contributions, and executing the details of your tax plan. It can be a mad rush at the end of the year, so I will leave you with a few details to consider:

• Cold Weather Preparation: Anticipate increased winter expenses, such as heating bills and holiday spending.
• Planning the next year: This is a great time to review your spending this year. How have you been spending? How do you feel about your budget? Where are those opportunities to improve?
• Major Expenses: Confirm upcoming (or recent) major expenses, such as property taxes, insurance renewals, vehicle registration, and holiday gift purchases. Make sure these are captured in your budget and plan adjustments for next year.
• Changes in Income: Is your income changing as you start the new year?
• What are the new contribution limits to retirement accounts? – These numbers always post at the end of the year. Would be a good time to consult your advisor to find out what has changed!
• A legacy of generosity - National Philanthropy Day is Nov. 15. To take the celebration a step further than writing a check, consider how you can teach the joy of giving to the next generation. If you want your charitable spirit to have more influence in your estate plan, connect with your advisor.
• Engage in Tax Smart Planning: As I mentioned, this is the time to make sure we have everything wrapped up for the end of the year. It is important to keep the deadlines in mind for your tax strategy. Advisors are in communication often with your accountants to make sure your tax plans are executed efficiently. More information.

Planning an entire year of personal finance is hard. There is not doubt about that. Continuous planning is hard. Budgeting can be time-consuming. However, let’s shift the mindset here a little bit: If we constantly think about all of these as areas that can hold us back, we lose sight of the end goal. Instead, look at these as tools to help us get to where we want to be.

Yes, personal finance is a journey – You have destinations along the way. Those are the goals that you want to achieve. Continuous Planning, Reflection, Action. By incorporating these into your financial routine, you are taking charge of that journey. That is so important. As a financial advisor, I love to see people using the tools to make a difference in their lives.

I am looking forward to so many great things to come. Have a Happy New Year!

All the Best,

Gil

Any opinions are those of Gil Brandon and not necessarily those of Raymond James.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.