MoneySmart

Let’s Get Organized!

Seemingly small changes in your financial plan can lead to substantial results.

As we enter another new year, many people are eager to make a “fresh start”—particularly in key areas like health and finance. When it comes to the latter, these can be as simple as ensuring that all of your information is up to date and on track with your current goals.

In fact, reviewing certain items in your financial plan could mean the difference between your wishes being carried out or your assets going to an unintended beneficiary in the future. With that in mind, be sure to take some time early in the year to verify that everything is in place

Changes That Make a Big Impact

Making a fresh start in a new year can be the ideal time to do the following:

  • Review beneficiary designations
  • Get legal documents in place
  • Ensure that powers of attorney are current
  • Increase your savings
  • Reduce or cut unnecessary expenses

Reviewing Beneficiary Designations

Making sure that beneficiary designations are correct on life insurance, IRAs, retirement accounts, deferred compensation plans, and your will is extremely important, because if these are outdated, money and assets could go to an unintended recipient such as an ex-spouse or partner. It could also mean that someone you love dearly and want to take care of financially is left out.

Certain types of assets can be passed directly to beneficiaries without being dictated in your will or going through probate. In addition to naming one or more primary beneficiaries, you should also name contingent beneficiaries, just in case the primary beneficiary pre-deceases you.

Because life is constantly changing, you should review beneficiary designations at least once per year—or even more often if you have experienced major life changes such as marriage or divorce, the birth or adoption of a child or grandchild, the passing of a spouse or partner, and/or the purchase or sale of a home or business.

Getting Legal Documents in Place

The beginning of a new year is also a good time to get your legal documents in place if you have been putting this off. Or, if you already have a will, trust, etc., now is the time to make sure that they are all up to date, based on your current situation and objectives.

This is also important if you have elderly loved ones who are getting older and they don’t have a plan in place yet for their wishes regarding health care and long-term care, as well as end-of-life and funeral plans.

Ensuring Powers of Attorney Are Current

While nobody likes to think about becoming incapacitated, the reality is that unexpected illnesses and accidents can and do occur. If that happens, you will want to be sure that your intentions are known, and that they will be carried out by someone you trust. Therefore, getting your powers of attorney (POAs) in place for healthcare and financial matters is critical.

A durable power of attorney names the person(s) or agent who will act on your behalf in financial, real estate, and legal transactions if you are no longer able to do so yourself due to incapacitation, whereas a healthcare power of attorney designates one or more individuals—such as your spouse, partner, or other loved one—to make important healthcare decisions on your behalf.

Another document that is a key component to a complete plan is a DNR, or “do not resuscitate” order. This is a medical order that is prepared by a doctor that instructs healthcare providers not to perform CPR or other life-saving measures on you, based on your specific wishes.

In addition to making sure that your own powers of attorney are updated, you should also do so if you will be representing someone else as their POA. The beginning of a new year is a great time to get this done.

Increasing Your Savings

Entering into a new year may also be a great time to increase your savings. Typically, the annual maximum contribution amounts for IRAs and employer-sponsored retirement plans goes up every year, so increasing what you put in is usually possible.

Even if it doesn’t seem like a lot, every additional dollar that you contribute adds up. For example, even just an additional $20 per week equates to more than $1,000 at the end of the year. Plus, the money in your retirement plan(s) is allowed to accumulate and compound tax deferred or tax free.

There are other ways to give your savings a boost, too. For instance, if you will be getting an income tax refund, you could use a portion of it to pay off debt, and then put the rest of the money in savings, rather than spending it on items that you might not really need.

Reducing Unnecessary Expenses

Reducing, or eliminating, unnecessary expenses is another primary component in working toward financial security. In this case, take a close look at your 2024 budget and see where costs could be trimmed.

As an example, do you really use that gym membership or that expensive streaming service that you’ve been paying for every month? If not, it may be time to cancel them. Some other ways that you could cut costs include:

Shopping for cheaper home, auto, health, and/or life insurance rates;

Comparing cell phone carriers for a less expensive company or plan;

Being mindful of how much you spend on non-essential items and/or eating out in restaurants.

Any of the money that you save on your expenses could be redirected into your personal savings or retirement plan.

Get a Financial Jump Start for 2024

The earlier you put your plan in place—or update your current plan—the more time it has to build momentum. Early in a new year is an ideal time to review what you have and make sure that it still correlates with your short- and long-term goals.

Having financial planning professional on your side can help ensure that you are on the right track with what works best for you. And working with a professional who is knowledgeable about issues that impact the LGBTQ community can be even more beneficial, as they can guide you based on the current legal and economic environment.

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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