Happy New Year! First, I would like to take this opportunity to wish you and yours a very happy, healthy and prosperous New Year. I hope that 2017 is the year when all your dreams come true.
At the beginning of a New Year I always remind everyone that it is a great time of year to recommit to keeping your financial affairs in order. I believe that when it comes to personal finance, there are five main areas you need to focus on. These are estate planning, investments, taxes, risk management and debt. It is important for everyone to make sure that all five of these areas are taken care of. Unfortunately, if one of these areas is deficient, it can cause all sorts of problems. Therefore, as difficult as it may be, it is important to consider all five of these areas.
In the estate planning area, it’s important to review all your estate planning documents including your will, trust and power of attorney. You need to make sure they are accurate and up to date. If you do not have any of these documents, now is the time to do them. Remember, estate planning is not just planning for your death; it’s also planning for family emergencies. As I’ve always said, the more you keep judges, courts and lawyers out of family affairs, the easier life is and having up-to-date estate planning documents can make handling a family crisis easier on your loved ones.
From an investment standpoint, it is always important to make sure your current investments match your individual goals and objectives and risk tolerance level. Investors who do not have a game plan are investors who are gambling and we know what happens to most gamblers, they lose. Therefore, now is the time to review your portfolios to make sure they reflect your current goals and objectives.
When it comes to taxes always remember your goal is not to lower your taxes but rather to be smart with them. That means different things for different people. For example, for many of you it may mean converting traditional IRAs into Roth IRAs, or for those of you with children it may mean taking advantage of the Michigan Education Savings Plan. Remember, taxes are more than filing your tax returns; it’s making sure you handle transactions properly and take advantage of opportunities such as retirement saving accounts or even available flexible spending plans.
When it comes to risk management, the important thing is to identify risks and decide if it is a risk you can assume or need to deal with. Insurance is one way of covering risk, but not all risks need to be insured. Furthermore, when it comes to risk management, for those of you with homes and cars, it’s important to review your coverage to make sure it still fits your needs and if appropriate, shop your coverages around. Remember when reviewing your coverages not to forget about your deductible. Raising your deductible is a great way to lower your premium.
In addition, when reviewing your risk management needs don’t forget about life insurance. Not everyone needs life insurance and there are many people who continue to pay on policies they do not need. The question is not whether or not we are going to pass away because we all know that answer. The question is will anyone lose financially if you pass away does anyone lose out financially? If the answer is no, you don’t need insurance.
Lastly, it is always important to review your debt situation. Not all debt is the same. For example, some debt is tax deductible while other debt is not. The key is to review your debt situation and make sure you’re being efficient with it. Even though everyone’s debt situation is different, one thing I can tell you is if you have charge card debt, it is a type of debt that needs to be extinguished as soon as you can.
Getting and keeping your financial house in order is not easy but it must be done. We live in a time where everything changes at a rapid pace and we have to be able to respond accordingly. The consequences of not keeping your financial house in order can be severe not only to you but also to your family. Therefore, as we start the New Year, spending time and getting your personal financial affairs in order will help make 2017 a good year for you.