The end of the year is traditionally a time for resolutions, vows to spend more time at the gym, eat better or see friends more often. But it’s also a great time—even following those gift-shopping sprees—to take stock of your finances and position yourself to do even better in the year to come.
That can mean a broad range of things, from recalibrating your investment portfolio, to examining your emergency fund, renegotiating your insurance plans and boosting your retirement savings.
With so many complex factors in play, the first step is to make an appointment with a trusted advisor, says Albert A. Fox, a wealth management advisor and senior vice president - Investments, at Fox, Penberthy & Dehn-Merrill Lynch in Mount Laurel.
“Re-engage in conversations with your investment professionals,” Fox urges. “Determine any changes in your risk tolerance, consider how your portfolio can generate income in a possible low-yielding market environment, as well as take advantage of current tax laws, such as the temporary extension of the long-term capital gains rate and ordinary income brackets.”
The best way to go into that conversation is armed with knowledge and plenty of documents—to be precise, a full cataloging of your financials from the previous year. Reviewing what you’ve done in the past is critical for planning ahead, according to George J. Ernst Jr., senior vice president and financial advisor at The Ernst Group at Morgan Stanley Smith Barney in Mount Laurel.
“Individuals should be organizing their financial records. This is not simple, but taking the necessary steps gives you peace of mind. We recommend that clients have a document locator, so loved ones know where these important documents are kept,” he suggests.
The end-of-year assessment should include many factors, Ernst adds: “Review current year-to-date expenses to see if they are in line with what you projected for the year. Review life insurance and all other insurance coverage. Pay attention to premium amounts and benefits. Review beneficiary designations, wills, power of attorneys and health benefit plans.”
Ernst adds, you will also want to “review mortgage and other debts(s) you may have in place, as well as review the interest rates, term and balances.” It might be a good time to refinance or there may be an opportunity to replace high-interest-rate credit card debt with home equity loans or mortgages while interest rates are low.
As to what you’ll do once you have all your financial information in place, it’s highly personal to your own situation and goals, says Stanley H. Molotsky, president and chief executive of The SHM Financial Group in Voorhees, Collingswood and Lakehurst.
Molotsky says every six months, SHM gives its clients a “financial stress test” before making an action plan going forward. “In today’s mixed-up environment, it’s extremely critical that a client does this. It looks at where their assets are, and where they would like to be from a risk point of view,” he says. A financial advisor can use that information to balance a client’s risk tolerance with forward-looking goals. Molotsky will also use this information to craft an exit strategy for a client to protect against the risk associated with any given investment.
He also works with clients to make sure their comprehensive financial picture is in place.
For example, he says, “Everybody should have an emergency fund, especially today.” He suggests that fund be equivalent to six months of income, which would be available if needed in emergency situations. As well, he urges an aggressive retirement savings plan and says being an independent fee-based advisory entity enables his company to offer clients almost unlimited retirement savings options.
There are other factors that can impact whether an advisor is the best choice for you, says Earl Marks, senior vice president and branch director at RBC Wealth Management in Mount Laurel. Some wealth managers and advisors specialize in growth—ideal for young people looking to maximize investments over time—while others focus on income, which is essential for anyone nearing retirement age. Since Marks specializes in income, he seeks out lower-risk ways to maximize clients’ savings.
Of course, no matter which advisor you turn to, the basic advice for retirement planning remains the same, says Marks: “Put away every cent you can as soon as you can possibly start, because it will cost you more to retire than you can imagine.”
The same applies to college savings, he says: Starting early and monitoring savings frequently are both essential. If you haven’t begun saving for college, 2012 is definitely the year to do it. Parents, Marks adds, “should start to consider exit strategies when the child enters high school, so that the money is liquid when the child enters college.”
And the No. 1 financial resolution for 2012? Don’t wait until the end of next year to take stock once again. Says Marks, “I recommend being aware of your portfolio all the time.”
When it comes to your future, a financial advisor can help provide security and stability in even the harshest of economic climates.
Rick Clifford, CLU, ChFC
Rick Clifford has more than 22 years of experience as a financial advisor. Areas of expertise are fee-based financial planning, wealth management, social security planning and retirement income solutions.
The Ernst Group at Morgan Stanley Smith Barney
George J. Ernst Jr.
Approaching 2012, individuals should be organizing their financial records. This is not simple, but taking the necessary steps toward organization gives you peace of mind. We recommend that clients have a document locator so loved ones know where these important documents are kept.
Fox, Penberthy & Dehn-Merrill Lynch
Albert A. Fox, CFP®, CIMA®
Meaningful valuation imbalances have been created by the recent market action and present select opportunities for patient investors. Within each asset class of your portfolio, we would encourage investors to seek out “scarcity themes”—Yield and Growth—and take this opportunity to reflect on opportunities to upgrade.
RBC Wealth Management
Earl Marks, CFP®
While saving for college sounds difficult, many families conquer college financing. However, it’s retirement that is often ignored after college has been paid for. Being prudent about both saving and spending are key to a secure financial future. A variety of fixed income products are good strategies to help you start a systematic savings habit.
The SHM Financial Group
Stanley H. Molotsky
The SHM Financial Group is an independent family-run business. By keeping their practice small, they can give each client the individualized attention they deserve. SHM also believes in educating clients so they can make sound financial decisions. They accomplish this by utilizing a comprehensive approach by working with quality professionals for investment analysis, asset protection, tax reduction strategies, insurance, long term care planning and estate planning.
Collingswood & Voorhees
Published (and copyrighted) in South Jersey Magazine, Volume 8, Issue 9 (December, 2011).
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