5 Ways to Show Your Financial Plan Some Love

Valentine’s Day is typically about roses and chocolates, but nothing is lovelier than a beautiful investment strategy. Below are five things a savvy investor does to show their financial plan some love. womanheart

1. Stay Curious

Whether you manage your own investments or pay someone to manage them, be informed. Every person should have enough understanding of financial nomenclature to ask educated questions regarding his or her investment accounts, stocks, bonds, mutual funds, etc. Also, be sure to review your statements. It is very important to keep up with your financial position. You never know when you might come across something in your statement that needs clarification. If you do have questions about your financial statement, financial position, or performance, do not be afraid to ask questions. Being inquisitive is key to understanding your financial position, and it is likely you will learn in the process. Your financial advisor should always be willing to provide answers to your questions in terms you can understand, as well as provide you with your financial statements. If your advisor is being evasive, proceed with caution.

2. Control Expenses
Remember that fees, trading costs, and timing of tax gain/loss recognition are the only controllable components of investment returns. Your goal should be to maximize your NET return after subtracting trading costs, management fees, taxes and inflation. If possible, investments should be held for at least a year to recognize favorable capital gain rates, and if you do not know how much you are paying in fees, ask! If your financial advisor leads you to believe you are not paying a fee, find out how they are paid. Is it through 12b-1 fees, loads or commissions? If so, ask yourself if that advisor is truly working in your best interest or working in their own best interest by making investments that increase their commission.

3. Increase Your Savings
At the beginning of every year, you should make it a point to increase your retirement plan contributions and/or personal savings.  Don’t just stop at the amount your employer will match, and if applicable take advantage of Roth options.  While it seems simple, most people do not actively follow a budget and instead, think they intuitively know what they spend and where. But by being intentional about your family’s budget, it will ensure you can accomplish your long-term goals and sets a good example for your children and grandchildren. Make sure you talk with them about the savings process and help pass on these important disciplines.

4. Rethink Charitable Giving
If your individual stocks saw significant capital appreciation last year and you are planning on making a gift to a charity this year, consider making a gift of those shares of stock.  By gifting appreciated stock, you will get the full tax deduction, without having to sell and recognize capital gains.  This allows the charity to receive more, and you’re able to give (and deduct) more.  Also, if you are 70 ½ and are required to take a distribution from your IRA or retirement plan, that amount can also be gifted directly to a qualified charity without recognizing the income.  Contact the business development officer at your favorite charity to find out if this is an option.

5. Talk About Death
Finally, no one likes to talk about the inevitable, but you need to make that a priority this year. That’s what investment is all about: taking care of you and yours. Talk with your family about your estate plans. Take time to create a will or revocable living trust if you do not already have one. Be sure to check the beneficiaries listed on your IRAs, 401(k)s, payable-on-death accounts, and insurance policies. Has someone preceded you in death, been married or divorced? Update the beneficiaries on those accounts if necessary, as they are not subject to your will or probate. Taking time to think through and talk about these issues with your loved ones will ensure your wishes are carried out.

Happy Valentine’s Day from our family to yours. We love serving you.

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