Fiscal Fitness: 5 Steps to Shape Up Your Finances in 2018

Lindsay Carter |

Fiscal Fitness: 5 Steps to Shape Up Your Finances in 2018

By Jason Silverberg CFP®, CLU®, ChFC®

It’s January and the new year is in full swing. You’ve probably made resolutions - maybe even broken one or two already. If reviewing your financial situation wasn’t on your list of resolutions, now’s a good time to add it. And this resolution is one worth keeping because your future may depend upon it. Here are 5 items worth looking into during 2018.

1. What Do You Want Your Life to be Like? We start off here because in order to determine your views on the rest of the items on the list, we have to figure out what you want your life to be like. Similar to the ubiquitous New Year’s resolution of losing weight, we have to know that magic number of where you want to end up and by when.


As we look into your financial world a bit closer, it’s also critical to know what that end goal looks like. Whether your plan is to send the kids to college, create a safety net if a spouse dies or becomes disabled, have a fruitful retirement at age 65, or even to avoid worrying about not having enough, we must start at the end, so we understand where our journey will take us.


Think about it. If money was no longer an issue for you, what would you do? Where would you live? Who would you surround yourself with? Then bring those dreams down to reality and think about what it would take for you to get there. Maybe you don’t have the capacity to quit your job and travel the world just yet, but at least we now know where “there” is.


Getting From “Here” to “There"




2. Know where you are today. Review your accounts and benchmark how far you are to your goals. Are you on schedule? Are you falling behind? How much more will you need to contribute to get to where you want to be? Knowing this is critical to providing a sense of financial security and helping you to create Financial Flow™.


(To find out more about Financial Flow™, check out the first chapter of my book, The Financial Planning Puzzle by clicking the cover image of the book to “look inside” here: ).


Many people already have savings strategies in place to attain a financial goal. Review these often. When doing so, don’t just review the current balance of the account, look at your asset allocation strategy (which categories your investments are in – Stocks, Bonds, Cash, etc). Make sure that you feel comfortable with the percentage of your assets in these categories. Because of the recent stock market upturn, your portfolio may have a higher percentage of stocks represented and rebalancing could be a good idea (putting your portfolio back in line with the original asset allocation). Keep in mind that asset allocation does not guarantee against loss. It is a method used to manage risk.


Not only should you review the current portfolio structure, but also each investment representing each category. Each investment can be evaluated based on its performance and risk against its peers as well as the benchmark index. Don’t automatically reward an investment for positive market conditions. For example, an investment in ABC Fund gained 15% in 2017. This sounds like a great return, right? Well, what if the benchmark actually was up 28% and its average peer was up 25%? How do you feel now?


You might want to also consider how much risk ABC Fund took to get that 15% return. Maybe the fund took much less risk than the overall index or the category peers and that’s why it underperformed. When the tide turns, it might lose less than the prevailing market and its average peer fund.


3. Consistency Counts. In a rising market, like the one we have been in recently, many investors have the urge to let their emotions take the steering wheel. Don’t give in. Push through the urge of jumping into a hot market. Remember Warren Buffett’s adage that as an investor it is wise to be “Fearful when others are greedy and greedy when others are fearful.” If you’re feeling a bit greedy, fall back on consistent investing strategies like Dollar Cost Averaging*.


With dollar cost averaging, an investor is taking their money and dividing it up into periodic payments into the market. For example, Sarah wants to invest $60,000 into the market. Instead of investing all $60,000 in a lump sum, she might consider investing $5,000 per month for 12 months. This would allow Sarah to buy into the market at a variety of different levels and alleviate any worry that she mistimed her investment.


The theory behind this strategy relates to the grocery shopper who has a $10 budget each week to spend on pasta. When pasta is $1 per box, she can purchase 10 boxes, but when pasta is on sale for $0.50 per box, she can buy 20 boxes for the same $10.


As shown by this example, dollar-cost averaging helps take the guesswork out of the market, with a consistent investment approach that allows you to buy more shares of stock at lower prices and less shares at higher prices. Keep in mind that you should have a longer time horizon for this type of investment strategy and you should consult your personal financial advisor on how this strategy can play into your situation.


* Dollar Cost Averaging does not assure a profit and does not protect against loss in declining markets.  Also, since such a program involves regular investment purchases regardless of fluctuating price levels of the investment, consider your financial ability to continue purchases through periods of low price levels. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.



4. Plan for the Worst and Hope for the Best. What would happen if you or your spouse died or became disabled? Many families would be devastated by the loss, not just emotionally, but financially too. Having insurance protection can help lessen the burden. Review your current life and disability insurance policies. Has anything changed since you last reviewed the strategy? Review your beneficiaries and see if they need updating as well.


Take a look at what coverage you have through your employer. Many just rely on these programs, but most times it’s not enough. Furthermore, what would happen if you got laid off, or changed jobs? You could lose that coverage.


Calculate how much life insurance you need with this worksheet!


Figure out your total insurance need and consider using outside insurance carriers to help fill the void. Just remember that life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender periods. When planning with life insurance, start to think about your need in the future. Many overlook the need for coverage beyond when their children can fend for themselves. Ask yourself, how much coverage will you want after your kids leave home, but before you retire? How much will you want in retirement?


Review new products and see if they fit your specific situation. In recent years, Long Term Care features have been added to life insurance policies as a rider. This provides some benefits in the event you need to enlist a caregiver. By mixing Life insurance with Long Term Care benefits, you can provide an answer to many pre-retiree’s concerns of rising premiums and the desire for additional death benefits. Speak to your financial advisor about specifics on how to create an appropriate strategy.


5. Where There’s a Will, There’s a Way. Make sure you have a will. If you die without one, your state will provide an order to distribute your assets for you, but you may not like how they will designate your assets. If you already have a will, then you’re one step ahead. Just make sure that you review it with your legal advisor each year to avoid omitting any changes that may have occurred. Who would take care of the kids, if something happened to you and your spouse? You want to feel confident that if something happens, then you have a plan in place.


Also, don’t forget the Advanced Medical Directives which include your living will, power of attorney, and health care proxy, each making sure that if you cannot make medical decisions on your own, then your wishes will be carried out. Financial advisors do not provide tax or legal advice so work with your legal advisor to accomplish this step.


As you begin to turn over that new leaf and make 2018 a fruitful financial year, consider enlisting help from a financial professional to help you along the way. Many people don’t know how to manage the financial aspects of their lives themselves. It’s actually perfectly normal. Be sure to interview a few to find an advisor that fits with your financial circumstance.


Download the Financial Planner Interview Checklist Here!


So, here’s to 2018, may it be rewarding and prosperous for us all!

“Cheers to a New Year and another chance for us to get it right.”

Oprah Winfrey




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