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With the beginning of a new year, it seems everywhere you turn you
hear something about self-improvement. There are plans for weight
loss, exercise regimens, quitting smoking, going green and more.
What about your finances? Even if you think your finances are in
‘good shape’, everyone could use a little ‘tune up’ to make sure
everything is running smoothly. And it’s not as hard to do as you
think. There are some very simple steps you can take that can make a
world of difference.
Step 1: Check your beneficiaries…all of them. A beneficiary is
simply who will receive a given asset when you die. Assets with
beneficiaries include life insurance policies, retirement accounts
and annuities. Even bank and brokerage accounts have a feature
called P.O.D. or T.O.D., which stands for payable (or transfer) on
death. Many people forget who they listed as beneficiaries, and when
they check, are often shocked to find ex-spouses, deceased relatives
or estranged family members listed. Do yourself and your loved ones
a favor and make sure your beneficiaries reflect your current
wishes.
Step 2: Check your Living Trust and/or Will. If you don’t have any
plan in place for distributing your assets at your death, by all
means put one in place now. If you have a plan, make sure it’s up to
date. One of the biggest mistakes those with Living Trusts make is
forgetting to keep all their assets in their trust. For instance,
have you purchased a vehicle recently, or maybe a vacation home or
time share? Made any new investments? If so, be sure they are
registered under the name of your trust. Whether you have a Living
Trust or a will, be sure there aren’t changes you need to make.
Perhaps you have new grandchildren or there has been a divorce in
the family. Your designated executor might no longer be the one you
desire. Powers of Attorney might not be up to date.
Step 3: Check your insurance needs. Our needs change through life
and our insurance needs change along with it. If you’ve recently
been blessed with children and/or your once income-earning spouse is
now home with the kids, you might need increased income replacement.
On the other hand, if you’re newly retired, you might not need as
much life insurance as before. You might need more homeowner’s
insurance if you’ve built an addition or have valuable belongings.
Liability coverage might need to increase. Your auto insurance might
have little uninsured motorist coverage.
Step 4: Check your insurance deductibles. By raising your
deductibles on your home, car and health insurance, you might be
able to save some serious dollars. And don’t be afraid to shop
around for better rates. With the internet, getting insurance quotes
is easier than ever.
Step 5: Tune up your company retirement plans. Are you putting all
you can into your 401(k), 403(b), etc.? Are there any
company-matching funds you aren’t benefiting from? You should also
review and update your portfolio allocation. Is it all in company
stock? (Not a good idea!) Are your funds allocated too
conservatively or too aggressively? And don’t forget to check out
those beneficiaries while you’re at it.
Step 6: Tune up investment portfolio. The economic climate this year
will probably be considerably different than last year. That means
that you may need to adjust how your portfolio is allocated.
Depending on your needs and your tolerance level you may need to
move more money to international or more money out of the markets
and into fixed. Asset allocation isn’t something that you want to
set and forget.
You may also want to consider who you need to share your financial
and estate plans with. For instance, if you are recently widowed and
your spouse handled the finances, maybe you want to enlist the help
of one of your adult children. If you’ve named someone as your
successor trustee or your medical power of attorney, you might want
to discuss your desires.
These are by no means the only ways to tune up your finances, but
doing even just one of them can make a positive impact. And while
our new weight-loss diets might be hard to maintain over time, these
financial tune-up steps usually only need to be done once a year.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
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