Financial Spring Cleaning

This is one of our favorite times of the year. We are approaching spring, so the days are longer, air is warmer, and the final snow is melting away. This is also the time of year people begin spring cleaning and getting their house or other affairs in order. Since finances are on people’s minds since we are in tax season, we thought it would be a good time to do some spring cleaning for your finances as well. Below should be a helpful checklist to help with some spring cleaning:

Taxes

  • Prepare and file your taxes (*note the new deadline of May 17th)
  • Review withholding if you owe or receive large refund. Use this IRS tool.
  • Discuss tax strategies for this year with your tax advisor or financial planner
    • Charitable gifting strategies
    • Strategies for business owners
    • Strategies for those with executive benefits
    • Roth conversions

Personal

  • Develop and/or review your budget
    • Contact insurance providers to try and reduce rates
    • Contact internet, cable and cell phone providers to make sure you are getting the best rates
  • Review you credit reports from Experian, Equifax and Transunion. Click here to do it for free.
    • Dispute any wrong information
  • Review your credit score. This can be done with any credit card provider for free or use a site like CreditKarma.com.
  • Develop a plan to pay off your debt

Other Important Items

  • Review your financial plan if you have not done so in last couple of years and/or if any major life changes have occurred
  • Review your estate plan if not done in last five years due to recent changes in the law
  • Review your investment allocation
  • Rebalance your investments if not done in last twelve months

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Simplifying Your Retirement Plan

Like all things in life, retirement planning has many aspects to it and a few items we can control but most items are beyond our control. To help remove some of the stress of retirement planning, we would like to help reframe the way that you look at retirement planning. Looking at the chart below it breaks down the most important factors that impact your retirement and are broken into three buckets: 1) things you can control; 2) things you have some control over; and 3) items that you have no control over.

Too often we focus on the things in life that we cannot control and those are the items that cause us the greatest stress. Instead of wasting our time and energy on those items, we instead should put our focus on the buckets that we have control over.

Total Control Bucket

This bucket is the most important because these are the items that you explicitly control.  For most individuals, savings and spending are the two biggest factors for retirement planning and the two items you have the greatest control over! When you work with a Financial Adviser, any recommendations they make typically will try to reduce expenses or make you more money.

Some Control Bucket

This bucket includes things that you can influence but do not have total control over. Items in this bucket would be things like your health and longevity. We can do the best we can to be healthy which will reduce stress and increase life expectancy, but we have no control over diseases like cancer (i.e., heredity traits). Many times, people plan on working till a certain age, but things can change if you experience a layoff or health problems that force you into retirement. It is important to have plans for this bucket like trying to stay healthy, reducing stress, and having a plan for your career. However, we must keep in mind we do not have total control, so having proper hedges in a place like a disability policy, health insurance, emergency fund, etc. should be considered.

No Control

Humans always want to have the illusion of control. Most people do not respond well in dealing with things that they have no control over. The fear of something happening in the no control bucket (i.e. bad market returns) leads to more anxiety and sleepless nights than any other bucket. Remember that worrying is like a rocking chair, it gives you something to do but accomplishes nothing. That is not to say we do nothing with this bucket, but rather you build a retirement plan to reduce risks from this bucket. Market returns are something we have no control over but studies have shown a diversified portfolio produces the best risk-adjusted returns. No one controls what happens with taxes and government policy, but you update your retirement plan once these changes occur.

Summary

Use the above chart as a reminder to focus your time and efforts in retirement planning on the items that you have the most control over. Starting there will produce the best results and will reduce stress since it takes your attention from the items in the no control bucket that cause the most anxiety. Working with a Certified Financial Planner™ and focusing on the two buckets that you can influence, will give you a simple and lower stress approach to retirement planning.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.