Money & you Your financial-health checkup (second in a two-part series)
Protect yourself from identity theft: It can take 500 hours of your time to undo the chaos created by identity theft. No doubt you have better things to do than to spend endless hours on hold in automated phone systems. Here’s what you need to do:
Ÿ If you haven’t already, buy a shredder and routinely shred any paperwork or records, and credit card offers.
Ÿ Get a free copy of your credit report annually at www.annualcreditreport.com or by calling 1.877.322.8228.
Ÿ Don’t leave your laptop in your car or in your hotel room. Some of the worst cases of identity theft have happened when a thief gets a laptop with lots of sensitive financial information on it. If you must travel with your laptop, learn how to encrypt and password-protect your hard drive.
Update your beneficiary designations: Make sure your beneficiary designations on your life insurance, retirement plans, and other contracts specify the beneficiary you want today; make sure they coordinate with your estate plan. It’s easy to forget to update these over time. Don’t forget to name secondary beneficiaries in case something happens to your primary beneficiaries.
Strategic planning for tomorrow.
Review your investment plans: Have you defined your goals, asset-allocation targets, return expectations, and risk tolerance? By committing your intentions to writing, you’ve taken a major step in getting your investments on the right track. You can use this document to set up your investments and then to monitor them over time. If you decide you would like to have some objective advice to help you decide on an asset allocation plan that’s right for you, you can go to the Financial Planning Association at www.fpanet.org.
“Save more money” is not an investment plan. The only way you’ll make any real progress is to make your goal specific and measurable — set a dollar amount to save each month — and then automate the investment process. Your retirement savings plan at work is a good way to automatically invest money. Start with at least the minimum contribution to get any employer match.
Rebalance your portfolio periodically. Compare your current portfolio’s asset allocation to the parameters you’ve set in your investment plan. If you find too much or too little in various asset classes, think about how you can make adjustments to your portfolio to keep rebalanced to your desired mix. As you regularly invest, you need to decide if you should max out on your retirement contributions or add to your non-retirement accounts. Retirement plans don’t have to be as tax efficient as your non-retirement portfolio. Remember that asset allocation doesn’t ensure a profit or protect against a loss.
Review how much you’ve saved for the kids’ college expenses: You can gift up to $13,000 to any one person free of gift tax in 2013. If you are using 529 Savings Plans to fund college, you can contribute five times the gift tax annual exclusion in one year — or $65,000. Those funds are treated as ratable gifts over the next five years.
Check your progress on investing for retirement: Do you know how much you need to put away? Have you contributed as much as possible for the year? If you’ve maxed out all retirement plans, start building up your after-tax non-retirement accounts. Read “Seven Pitfalls on Your Way to Retirement” at www.clutewealthmanagement.com/archive/pdf/pitfalls.pdf for more on these and other retirement-planning ideas.
Results of your financial-health checkup
Congratulate yourself. Financially, you are healthier and closer to meeting your goals, simply because you’ve made the time to complete this checkup. If you think you might benefit from taking your financial health to a higher level, but aren’t sure if you need a financial planner or advisor, a complimentary guide is available at the Paladin Registry, a free public service that helps consumers avoid the risks and consequences of bad advice and select high-quality professionals who have the competence and integrity to help them achieve their goals. The Web site is www.paladinregistry.com/external/general/home_free_guides_1.php.
Heidi Clute, CFP® is the owner of Clute Wealth Management in and Plattsburgh, NY, and South Burlington, VT, an independent firm that provides strategic financial and investment planning for individuals and small businesses in the Champlain Valley region of New York and Vermont. Securities offered through LPL Financial, Member FINRA/SIPC. vMORE IN Upper Valley Business Briefs
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