| | Published August 1st, 2012
| Lynn's Top Five:
Time for a Mid-year Financial Planning Tune Up!
| | By Lynn Ballou, CERTIFIED FINANCIAL PLANNER(tm) |  | | Lynn Ballou is a CERTIFIED FINANCIAL PLANNER(tm) professional and co-owner of Ballou Plum Wealth Advisors, LLC, a Registered Investment Advisory (RIA) firm in Lafayette. Lynn is also a Registered Principal and Branch Manager with LPL Financial (LPL). The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendation for any individual. Financial Planning offered through Ballou Plum Wealth Advisors, A Registered Investment Advisor and a separate entity. Securities offered through LPL Financial, member FINRA/SIPC.
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Too hot to go outside? Have that nagging feeling that there's something you should be doing that you've forgotten? As we are lulled into that peaceful part of the summer, it's easy to see why at tax time we shake our heads and wonder "what was I thinking?!" about a few things that happened during the prior year. Now's the time to take stock of where you are and have some "ah ha!" moments so that you can avoid that tax season lament next year. This is a great time to dust off our financial goals and see if everything's okay and on track. Here are a few things you might want to check up on and ask yourself:
1) Am I on target with my income tax withholding? Whether you have taxes taken out of a paycheck or you pay quarterly taxes, be sure you are withholding the right amount. Owing too much to the government at tax time can derail your budget and be costly in penalties and interest as well. Check in with your tax pro, or use your own talents with your favorite tax software, and see if you need to adjust withholdings or estimated taxes. If you are overpaying, think about reducing your future quarterly taxes so that you don't give the government an interest free loan
2) Am I saving enough? Sometimes when the unexpected happens we tend to drift away from our savings goals. Whether money for investments is being taken out at work through retirement plan contributions such as 401(k)s or you are proactively investing with your after tax earnings, remind yourself of what you need to put away each year and break it down monthly. If you are behind in your goals this year, don't be discouraged, you still have a good chunk of the year left and instead think about the best ways to get caught up. For example, if you are turning 50 at any time this year, you'll qualify for higher contributions to IRAs, 401(k)s and other retirement plans. If you need to save on your own, you can set up automatic investment contributions to make it as painless as possible. Maybe you need to say no to some "wants" (or buy them less expensively) to free up some cash flow to get focused on your future. Don't let time drift by without action --- you'll regret it later on and it will be too late to get caught up.
3) When was the last time I chatted with my insurance agent? You are busy --- and you get a big intimidating renewal package in the mail from your casualty insurance company. If you are like me, the excitement of reading through and trying to understand it all wanes with time! And how many of us really understand all the line items on these policies anyway? And don't we often wonder if there are coverages we should have but don't? The cure is simple: have a chat with your insurance agent. If they don't reach out to you, then pick up the phone and call them. Ask for an explanation of each line item and talk about your situation and how your life, assets and circumstances have changed. Ask your agent what else they need to know to do a thorough job for you. Sometimes we are very private and reluctant to give our agent the full picture. But it's hard for them to do a great job for us if we don't share the details of our financial situation. If you feel that your agent is brushing you off, shop around for a better fit. You'll learn a lot in the process.
4) I will open my investment statements! Volatility in the markets is here to stay in my opinion. The swooning we experienced this year after a great first quarter has been disheartening to many. But that's not a reason to stick your head in the sand and not look at how things are doing! Not only do you want to be realistic about the progress of your net worth, but you also can use this as a great time to think about your portfolio design and specific investment choices. Do they reflect your true risk tolerance and are they allocated in a fashion that you feel appropriate? If not, make educated changes, and if you need help, reach out to a CERTIFIED FINANCIAL PLANNER (tm) professional or other trusted advisor to help you launch an in-depth review. Yes, it's an election year. Yes, we have a lot of uncertainty about tax laws, the Euro and a million other things. But tell me what period of history is exempt from worry --- yup, none. So open your statements, take a breath, take a peek, and move forward ---you will feel better by knowing what's going on.
5) Take stock of what you own and what may need replacing or updating in the next few years. It amazes me how as humans we are always so surprised and offended when a major auto tune-up is needed, the roof needs to be replaced or something like the washing machine decides to die at what is always an inopportune moment. Solution: plan ahead now! What should be on your radar of future unwelcome guest expenses? Once you know, you can plan. Start saving up for those costs and get the money into savings by setting aside money monthly in a "future expenses" account. If it's something big --- like a kitchen remodel --- and more than you can afford to save up for in advance, perhaps this is time to take advantage of very low interest rates and put a HELOC or other line of credit in place for future use. And while you are doing that, think about your current debts. Any that can or should be paid off because the rates are too high? Any loans that you can or should refinance to a better rate? Think it through, though, because a new 30 year loan at a lower rate when you only have, for example, 17 years to go on your current mortgage, may not save you money in the long run. So, run the numbers, and check it out --- but do check it out!
So, between summer reading, movies in the air conditioned theater, camping trips and the like, take advantage of those few quiet "in-between activities" moments to treat yourself to a mid-year financial check-up. Even if nothing needs adjusting, you'll be glad you did your homework and you'll be able to rid yourself of those nagging feelings that maybe something needs your attention. Then put it away, and go out there and get back to your summer fun!
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Lamorinda Weekly, Moraga CA