However you celebrated the start of 2022, and you most likely created a list of resolutions for the New Year. But did you take a moment to reflect on your financial wellness? Financial planning is a complex and ongoing process and is something that you will need the help of an experienced financial advisor to accomplish.
There are a lot of tasks to do in a year that will help keep your finances in check. That is why we have created a seasonal financial to-do list to help you stay focused on the most critical items to keep your financial goals attainable.
Winter To-Dos: January, February, March
Review Your Goals
Not only is January the start of a New Year, but it is also Financial Wellness Month which means now is the perfect time to get your finances back on track and evaluate your overall financial well-being.
Set up a meeting with your financial advisor this month to determine whether you are still on track to reach your financial goals or if you need to adjust your plan and account for new goals.
Review Your Portfolio
The start of the year is also an appropriate time to review your investment portfolio, especially since the 2021 stock market saw significant gains of over 20 percent.
If your portfolio consists of more stocks than bonds, it is critical to speak with your financial advisor about rebalancing to lower your individual level of risk in 2022 and to do so in a tax-efficient manner.
2022 Tax Preparation
With tax season upon us, start gathering documents for your 2022 income tax return in early February, including W-2s, 1099 forms, and itemized deductions. Additionally, be sure to gather other IRS-related documentation regarding 2021 stimulus payments or the 2021 Advance Child Tax Credit Payments.
Additionally, be sure to review your 401(k) and IRA contributions as the limits for 401(k)s are increasing in 2022. Work with your advisor to ensure that your taxes are withheld at an appropriate rate.
Spring To-Dos: April, May, June
Review Your Insurance Policies
As the weather starts to warm, think of this time of year as the ideal time for a different type of spring cleaning. Reach out to your insurance agent to review your property and casualty (P&C) policies, such as home and auto insurance.
By shopping around for quotes, you might find that you can save a significant amount of money just by switching companies. And if you do not already have an umbrella, now is the perfect time to use those savings to invest in one.
Buy an Umbrella
An umbrella policy is one of the most critical types of insurance a high-net-worth individual can have and is something that the CTWM team highly recommends to our clients.
Let’s say you are in a bad car accident, not uncommon this time of year. Umbrella insurance will go above and beyond the limits of your existing P&C policy to ensure the protection of your current and future wealth from risk. A small amount of money can go a long way in providing protection and peace of mind.
Review Your Need for Life insurance
Do you have more than you need? Can you use cash value or premium dollars in a more productive manner than in the current policy you have?
Additionally, review your life insurance policy to ensure the beneficiaries listed are an accurate reflection of who you want your assets to go to in the event of your passing.
You should also evaluate your need for long-term care (LTC) and based on this need, determine whether you will need to buy insurance or fund it yourself.
Summer To-Dos: July, August, September
Plan Next Year’s Vacation
Summers are meant for rest and relaxation and as such you should spend your vacation with family and friends. While it is possible that the summer may be affected by the pandemic again, take this time to plan for your dream vacation in 2023 or beyond.
Are you planning a European excursion? Or do you want to visit the top-rated vineyards across the country? Whatever your vacation goals, your financial advisor can help you to map out a savings plan to reach them.
Review Your Estate Plan
The summer is also a good time to create or review your estate plan. While not a pleasant topic, an estate plan is a critical piece in ensuring that your assets are distributed according to your wishes in the event of incapacitation or death.
Ensure that your will or trust is up to date and that your power of attorney and healthcare proxy are the people you want to be making decisions on your behalf.
While reviewing your estate plan, be sure to review your beneficiary designations for 401(k)s, IRAs, and other accounts.
Fall To-Dos: October, November, December
2023 Tax Preparation
It is never too early to start thinking about taxes. Take time in October and November to prepare for the 2023 tax season. If you wait until next April, it will be too late to make many of the moves that can minimize your tax liability this year.
If you are not paying attention, distributions from capital gains will be taxed. Your financial advisor can help to identify opportunities to harvest capital losses to offset these capital gains. Remember, the most you can deduct in capital losses is $3,000.
Give to Charity
Giving money to charitable organizations is scientifically proven to increase your happiness. In the spirit of giving back, donate to your favorite charities come November and December.
Even better than donating cash is to gift appreciated stock to your charity of choice. Not only does this benefit nonprofits who can sell it tax-free, but it also presents an opportunity for you to avoid taxes on capital gains. It’s a win-win situation.
TIP: While spending time with family during the holidays, be sure to discuss which charities to donate money to together. While you want to pass on your legacy to the next generation, it is more critical to pass on values, such as the importance of giving back.
Take Advantage of 529 Plans
If you have kids in college, be sure to contribute to your Connecticut 529 plan by the end of December. Money in a 529 plan grows tax-free and contributions of up to $10,000 are eligible for tax deductions on Connecticut returns.
Ready for the Next Step?
By spacing out critical financial to-dos throughout the year, you will be able to hold yourself accountable for your financial success. Remember, financial planning is a continuous process, especially as you establish new goals or the market changes.
If you want to discuss your financial needs and goals, please contact us at 860-470-0290 or by filling out the contact form.