Great Financial Planning Ideas For The Holidays
We make gift lists for our loved ones and resolutions for our health and fitness, so why not a list for a better financial life? Before this year ends, let’s reflect on our goals and priorities, and get ready to start 2021 with a bang!
Sit down, relax by drinking a glass of prosecco, eggnog, or your favorite drink, and think about what you’d like to accomplish next year. Then browse through our ideas below for actions you can take over the holidays. You don’t have to tackle all of them. Just pick what inspires you; it may motivate you to do more!
Get Financially Organized
Getting your financial house in order has great advantages, including an inventory of all the things you own and of everything you owe. The difference between the two is your financial net worth. The net worth tells you where you are financially and helps you measure your progress towards your life goals, and is a useful signal to develop good savings habits and adjust your goals and priorities. Use our complimentary tool and go through our 4 step approach to get financially organized.
Give budgeting a try with these simple tips
Especially in uncertain times, we want to be efficient with our resources. Budgeting is crucial to financial planning because it gives you awareness about how you use your resources, and highlights your financial strengths and weaknesses. We have created a simple way to get started with budgeting, without actually creating one, and a guide with simple steps to create your first budget.
Set meaningful goals
A key part of any plan is to set goals that are meaningful to you. Goals are measurable objectives that require planning and effort to achieve. You are likely to work towards your goals and stick with your plan only if the goal is meaningful to you. Take a look at our guide on goals to get started. Creating goals is the first step to help you implement change and motivate you to tackle other ideas on this list.
Build your investment guidelines
Think of your investments as the engine that will help you grow your wealth and achieve your financial goals. So it’s important for your investments to be in sync with your goals. Start by listing your goals and priorities, then go through our key questions to develop your investment guidelines. As part of this process, it may be useful to review your risk preferences by taking a free risk profile assessment from the University of Missouri. Then put it all together by creating a goals-based target portfolio.
Optimize your portfolio
Assuming you have a target portfolio that is appropriate for your goals, priorities, time horizon, and risk preferences, the next step is to make sure the portfolio is built with the appropriate components. Start with our guide to common sense investing in mutual funds and ETFs to learn how to avoid unnecessary risks and choose cost-effective funds for your goals.
After you review your current portfolio relative to the desired target, consider rebalancing the portfolio towards the target. Check out our guidelines for smart rebalancing!
Plan for a safety net
Going through a period of real uncertainty like 2020 is the best way to appreciate our nature towards risk and evaluate the plans we have in place to overcome setbacks. You don’t have a sound plan for your desired goals in life until you plan for emergencies and setbacks. Read our guide to creating a safety net to set a goal appropriate for your situation and start working towards it.
Use your savings efficiently
When it comes to savings for different goals, you have options across types of accounts. You have taxable accounts, tax-deferred accounts like 401(k), IRA, and 529 accounts, and tax-exempt accounts like Roth 401(k) and IRA, and potentially HSA accounts. Learn more about the different options and how you can use them to maximize the value of your savings.
In retirement, you are likely to rely on a number of sources for income: 401(k) or IRA accounts, taxable accounts, and tax-exempt or Roth accounts, in addition to Social Security. Make sure your withdrawal strategy is optimized to make the most of your savings. Take a look at why the right strategy can substantially extend the longevity of your portfolio, and learn about our three-step approach to design a tax-efficient spending strategy.
Learn your Medicare ABC
If you are close to age 65, it’s a great time to start learning some medicare ABC, and start planning for it. Many people think their health care in retirement will be free or close to it because of Medicare. Here is some bad news for you: Medicare is subsidized, but not free. If you don’t enroll before your 65th birthday—lifelong premium penalties may apply if they sign up after turning 65, so it’s important to know your options well before turning 65.
Give it away
The holidays are a time of giving, and a donation to a qualified charity can reduce your taxable income as an itemized deduction. But it can help you in other ways, even if you don’t itemize.
The CARES act passed by congress to provide Covid-19 relief includes a special provision for 2020 that gives taxpayers a $300 (individuals) or $600 (married filing jointly) special charity deduction. To qualify, the gift must be made in cash and go directly to the charity.
Besides that, consider donating appreciated investments or qualified contributions from your IRA to save on taxes, or donor-advised funds. Check out guides to personal tax planning and tax planning for business owners for these and other tax planning tips.
That’s it for our 2020 Christmas tips! If you’d like more, check out our blog page, and subscribe to our newsletter! Merry Christmas and Happy Holidays!
Until Next Time!
Massi De Santis is an Austin, TX fee-only financial planner and founder of DESMO Wealth Advisors, LLC. DESMO Wealth Advisors, LLC provides objective financial planning and investment management to help clients organize, grow, and protect their resources throughout their lives. As a fee-only, fiduciary, and independent financial advisor, Massi De Santis is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.
