Happy New Year! What better time than the start of a new year to craft your financial future. Working with a CFP® professional provides direction in several areas of personal finance, including budgeting, investments, insurance and tax planning. For those seeking help in any of these areas, partnering with a CFP® professional is the perfect New Year’s gift to yourself.
Time to Face the Budget
2024 is the time to do what many people try to avoid at all costs — review what they spent in 2023. The main question for everyone’s budget — is more money coming in or going out?
If more money is coming in, then what’s the best way to use it? It might be paying off debt, contributing money to a retirement plan or education fund, or saving for a specific goal like a new home.
If there’s a net deficit, then the focus turns to increasing earnings or reducing expenses. For those at max capacity in terms of working and earning money, identify the areas available to reduce spending. It could be your hobbies, vacations or other superfluous expenditures.
Budgeting also is a key factor in debt management, which a CFP® professional can help you with by creating a debt repayment plan.
Revisit Investment Strategy
Many people have a retirement plan they regularly contribute to, but how should you allocate that money, especially if you have some extra to invest? What investment vehicle should you prioritize? The choice often comes down to either prioritizing your Roth IRA — with tax deferral, tax-free withdrawal and maximum flexibility — or your company 401(k).
For those saving money for their children’s college, what should the breakdown be between retirement savings, 529 savings and a general brokerage account? And once all those accounts are funded, how should each be invested?
These, along with the various tax considerations associated with the financial accounts and investment strategies, are all investment questions a CFP® professional can help you navigate.
All Things Insurance
A CFP® professional can also help navigate the world of insurance, starting with the proper coverage amount in areas such as life, disability, long-term care, home and auto. Life insurance starts with projecting the needed coverage amount and then filters down to the various types, again with an eye on available cash flow. Disability and long-term care are specialty insurances that might not be for everyone. Recent inflation means also reviewing the replacement cost for your home. A new year is the perfect opportunity to review premium expenses that another insurance company could help reduce.
Proactive Tax Planning
Approach 2024 with a plan to reduce income taxes now or in the future. The use of retirement accounts, tax-advantaged investments, deductions and specific financial strategies can all help reduce the tax burden and let you hold on to more of your money. Your CFP® professional can also help you keep an eye on how taxes will play a part in retirement income. The goal should be to retire in the most tax-friendly way possible.
The new year provides an excellent opportunity to put all your financial affairs in order. Find your CFP® professional today to help you start 2024 off right.
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