Year End Financial Planning
The best financial decisions are made with the benefit of time, thoughtful
consideration and trusted professional advice. As tax time once
again approaches, there are many things you can do to give you the
flexibility to make the best long term financial decisions and
prepare to minimize expenses, taxes and the headache of organizing
your finances at the last minute.
Organize Your Tax Records Early
In preparing for this year’s tax filing you should begin to
organize tax records including year end investment statements,
capital gains and losses from asset sales, transaction records
from real estate transactions, interest and dividend records for
the year (1099s), payroll and withholding statements (W-2s),
records corresponding with deductible expenses such as property
taxes and insurance, business income and expense records, etc.
Review Your Insurance Coverages
At least once each year you should gather your insurance records
together and review the adequacy of your coverages. Be sure to
evaluate all coverages including life insurance, disability
insurance, homeowners insurance, auto insurance, liability
insurance, renters insurance, etc.
Store Your Documents
All your difficult to replace legal and financial documents should
be stored in a safe and fireproof location. Consider renting a
safe-deposit box at your local bank or credit union, or purchase a
fireproof lockbox from your local office supplies outlet.
Documents you should store include wills, trusts, powers of
attorney, titles of ownership (your home, cars, etc.), Social
Security cards, birth certificates, photographic negatives, list
of personal possessions, etc.
Review Your Estate Plans
Does your will still fairly reflect your personal wishes for the
distribution of your assets? Have the personal or financial
circumstances or your beneficiaries significantly changed over the
past year? Have you considered a gifting program to move assets
from your estate to those you wish to enrich? Have you reviewed
your estate plan in light of changing estate tax laws or changes
in your personal financial position?
Prepare to Minimize Your Income Tax Liability
Consider estimating your federal and state income tax liabilities
periodically to ensure proper withholding levels and quarterly
estimated tax payments. This will prove especially important if
you sell significant assets during the year or experience large
swings in your income level. Consider maximizing your deductible
expenses and savings such as qualified retirement plans,
charitable giving, deductible expenses, etc. Be careful to meet
all IRS dates and deadlines for withholdings and filings.
Review and Improve Your Balance Sheet
Consider increasing your long-term saving and decreasing your
debt. If you are not maximizing your tax-deductible employer
sponsored retirement plans and your individual tax-advantaged
saving plans you should evaluate your monthly cash flows with a
focus on increasing your monthly saving. The other side of your
balance sheet, the liabilities side, is equally important in
maintaining a healthy personal financial position. Every effort
should be made to completely eliminate the need for short-term
debt (credit cards and debit balances) and to efficiently manager
your long-term debt (mortgages).
Simplify Your Financial Holdings
Simplifying your financial holdings can eliminate much of the
drudgery of financial record keeping. If you have credit cards you
do not use, cancel them and eliminate the extra statements.
Consider consolidating your credit lines to the greatest extent
possible. Review your investment holdings for non-performing
assets or redundant accounts and consolidate your investments.
Although you may be able to
think of more exciting ways to spend your time, organizing your
financial records and planning your financial future will pay huge
dividends in the long run. Do what you can on your own and seek
professional advice from a trusted advisor where additional work
needs to be done.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice.