Time for Your Annual Financial Check-Up

Too many people wait until they file their income tax returns to evaluate the preceding year’s finances and plan for the next. You should really begin much sooner, though, perhaps before year-end. This will give you plenty of time to analyze what you have accomplished and to plan for what you hope to accomplish in the future. A checklist of questions might help:

1. What are your financial goals? Before you do anything with your money, you should decide how you want to spend it. Itemize what you currently have, what you need for the year ahead and what you hope to have ten, twenty or even thirty years in the future.
2. Over the past year, have you made progress toward achieving your goals? You should probably compare the performance of your investments to the goals you’ve established with regard to those investments for the year. The results of this analysis will help you decide whether or not you should alter your investments. Remember, performance is led by the manner in which your assets are allocated more than anything else. Can your portfolio “weather the storm?”
3. Are any changes about to occur that will affect either your immediate needs or your long-term goals? A job change, for example, may drastically alter your income and lifestyle. Other circumstances which may affect your finances include buying a new house, financing an education or paying for a wedding. Planning at least one year in advance will help you adjust to these changes financially.
4. What can you do to reduce your taxes? A general rule when it comes to taxes is to defer income to the next year while accelerating deductions for the present year. To defer income, you might postpone selling assets or purchase Treasury bills or other investments which will mature the following year. To accelerate deductions, you might double up on your charitable contributions, pay your state taxes before year-end (if you are not subject to alternative minimum tax) or invest in a tax shelter.
   Quite often people who qualify will also make contributions to their Individual Retirement Accounts at the last minute for an additional deduction. However, in the long run it’s much better to make your IRA deposits early in the contribution year rather than waiting until you file your tax return for that year to take advantage of tax-deferred compounding.
5. Do you need any additional help to implement your plans for the future? A lawyer, accountant, financial advisor/stockbroker or trust officer can be a tremendous help in any financial matter. If you’re not progressing as you would like, or if you find that you don’t have the time to manage your money properly, consider hiring a professional. It could be the one investment which makes all the difference. And more often than not, it’s more than one professional—it’s a team of professionals who work together to accomplish your financial needs.

Remember—an annual analysis is fine, but make sure necessary adjustments are being made throughout the year as things change. TPW