Five Powerful Planning Strategies To End the Year

The leaves have just begun to turn colors here in the Northeast. The kids are well into the school year and planning their Halloween costumes. The sprint to 2020 has begun.

Maybe you know what that means when it comes to financial planning: there are several important actions you should take now, well before the ball drops in Times Square.

  1. Get your spending under control
  2. Prepare for tax season
  3. Check your deductibles
  4. Assess risk and rebalance your investments where appropriate
  5. Monitor your goals

Get Your Spending Under Control: “I just don’t know where all the money goes!” I’ve heard that one about a million times.

Our hectic lives don’t make it easy to factor in the time to actually assess whether we’re directing our hard-earned dollars toward what we value most. If you’re like a lot of folks who throw up their hands in despair over their cash flow, take a deep breath.

Now start over.

Begin with a list of your fixed costs, such as rent or mortgage, loan payments and utility bills. Understand what you can control and what you can’t. Once you total the dollars that are absolutely leaving your checkbook each month, look at what’s left and divide up the remaining amount based on what’s most important to you.

Typically, dollars are leaking either because you’re not paying attention to what you’re spending, or you’ve developed certain habits that add up more than you realize. (A round of $6 grande lattes for your pals every day, anyone?) You know, stuff you can control.

It takes willpower, desire and action. Use a program like Mint, YNAB, Mvelopes or Pocketguard, hat will help you examine your spending and work with stakeholders—ie. your family, your significant other—to develop a plan that works.

With the holiday season coming up, decide now how much you’re willing to spend on festivities, gifts, travel, or whatever else you might have in mind.  Set those funds aside if you haven’t done so already. If you’re carrying credit card balances, especially from high interest cards, consider exporting them to a lower interest platform as you pay the balance down.

Prepare for Tax Season: There is a significant benefit to knowing what your tax situation will look like before you file. Then you can potentially do something about it.

Work with a qualified professional to do a tax projection for 2019. Understand what moves between now and December 31 might impact your tax bill.

For example, you might improve the end result by making charitable donations (cash or tangible assets), or selling certain securities that might offset your capital gains. If you’ve had high out-of-pocket medical expenses, you want to understand whether these expenses will lessen your tax liability and whether you want to front load as much as possible into the rest of this year.

You might want to add to your 401(k) or contribute to an IRA for tax and accumulation purposes. Review your last year’s return with your CPA and ask what changes have occurred or where opportunities for tax savings might arise. Don’t wait until December 20th, as the chance of making last minute transactions or employing special strategies becomes more difficult when you’re facing the deadline.

Check your deductibles: At some point during the year, your insurance policies are going to be up for renewal. Most people have homeowner’s, life, health and auto insurance. You might also have disability, long-term care and an umbrella coverage.

For many, insurance is a “set it and forget it” kind of thing. We pay premiums and rarely assess whether we have adequate protection or whether we’re paying for something that we no longer need.

Check your deductibles and coinsurances. Depending on the type of risk you’re protecting, consider a few options.

Maybe you can increase the deductibles and self-insure to a greater degree. If you were previously a smoker but have quit, you should be able to get non-smoker rates for life and disability policies. If you’ve installed smoke, fire or burglar alarms, you might save some money on your homeowner’s policy.

By carefully assessing your costs and risk, you might save some money and make your coverage more appropriate for your circumstances. .

Assess risk and rebalance investments: If you watch the news, you are probably well aware of market volatility. Behavioral research has shown that when markets are up, consumers are willing to take more risk and, conversely, when markets are down, less.

In reality, your risk tolerance and portfolio allocation should not change based on market conditions, but rather should be arranged based on your time horizon and your willingness to get through market corrections and recessions without bailing.

The “right” portfolio is the one that will increase the chances of reaching your goals, regardless of market cycles. You might have a very high tolerance for risk, but if you need a modest return to achieve your goals, you want to strike the right balance in portfolio allocation that aligns with the outcomes you require.

If you’re taking more risk than necessary or than you can live with, adjust your portfolio accordingly. As we get to the end of the year, be mindful of the tax consequences.

Monitor your goals: What are your goals, anyway? You might be planning for sending your children to college, retiring, helping out aging parents, buying a home, or just paying off student debt.

Whatever your goals are, make them meaningful and big enough that you will take action. All the great plans in the world don’t amount to anything unless you actually put them into effect.

Spell out your goals and monitor your progress at least quarterly. Think about it; if you were a passenger on an airplane and the pilot was flying in a general direction but not checking on the course, you might wind up landing in Des Moines rather than Los Angeles.

The same holds true with your financial life. Know your destination and check your progress.

Make the final third of the year productive and meaningful. It’s the best New Year present you can give yourself.

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