When it comes to managing your financial life, it’s easy to get caught up in the day-to-day and lose sight of the bigger picture. But even if you’re generally on top of things, there are certain things you should be doing – and not doing – right now to ensure your financial health.

Popular Procrastinations – Do These First

We all have a tendency to put off certain tasks, and when it comes to our finances, there are a few that tend to get put off more than others. But the best way to tackle these procrastinations is to take the next best step towards getting them done. 

That step might be as simple as making a five-minute phone call or sending an email. But by taking that step, you’ll set the wheels in motion for the rest of the tasks that need to be done.

Get your estate planning done. 

This is an important step in ensuring that your assets are distributed according to your wishes after you pass away. It’s important to review your estate plan every few years, or whenever there’s a significant change in your life (such as a marriage or the birth of a child).

Implement a password vault. 

With so many online accounts and services, it’s borderline impossible to keep track of all your passwords and not repeat any of them. A password vault allows you to securely store all your login information in one place, making it easier to protect your accounts from hackers.

Look at your investment choices.

As an investor, it’s important to regularly review your portfolio to make sure it aligns with your goals and risk tolerance. This may involve reallocating assets, selling underperforming investments, or adding new positions.

Do an insurance review with your insurance agent. 

Your insurance needs can change over time, so it’s important to review your coverage with your agent to make sure you have the right amount and type of insurance to protect yourself and your family.

Invest in yourself and manage your career. 

Your career is one of your most valuable assets, so it’s important to invest in your professional development and take steps to advance your career.

Remember the Basics

In the midst of all the complex financial decisions you’ll make in your life, it’s easy to forget about the basics. But these fundamentals are the foundation of your financial plan, and they’re just as important as the more advanced strategies.

Maximize your retirement plan contributions if that’s part of your plan. 

By contributing as much as you can to your retirement plan, you’ll be taking advantage of the tax benefits and compound interest that can help you reach your retirement goals.

Determine whether the Roth or the traditional plan is the best choice for you. 

Both Roth and traditional retirement plans have their own set of pros and cons, so it’s important to understand the differences and choose the one that aligns with your goals and tax situation.

Maximize your health savings account at work if you have one.

A health savings account (HSA) is a tax-advantaged savings account that you can use to pay for qualified medical expenses. By contributing as much as you can to your HSA, you’ll be taking advantage of the tax benefits and saving for future healthcare expenses.

Make sure your cash reserve account is adequate.

Having a cash reserve is an important part of any financial plan, as it gives you a buffer to fall back on in case of an emergency.

Pay off any credit card debt monthly. 

Credit card debt can be a significant burden on your finances, so it’s important to pay it off.  Your credit cards should not be your emergency fund.  If you are unable to pay them off monthly, re-evaluate your spending plan.  

Review your financial plan and goals. 

Or at least schedule an appointment with your financial planner. Reviewing your financial plan and goals regularly will help you stay on track and make any necessary adjustments.

Stop Doing These

Just as there are certain things you should be doing to manage your finances, there are also certain things you should avoid to keep your finances on track.

Panicking or worrying about the market. 

While it’s important to stay informed about market conditions, it’s also important to remember that you can’t control the market. Downturns are a normal part of investing, and panicking or worrying about them can lead to poor investment decisions.

Watching too much news. 

The news can be a great source of information, but it can also be overwhelming and anxiety-inducing. Limit your consumption of news and focus on the information that’s most relevant to your investments and financial goals.

Looking over the fence. 

It’s easy to compare yourself to others and feel like you’re falling behind, but remember that everyone’s financial situation is different. Stay focused on your own needs and your own plan.

Fearing failure. 

Investing and building wealth requires taking risks, and there’s always the possibility of failure. But it’s important to remember that failure is a part of the process and that you can learn from your mistakes.

Perpetuating bad habits. 

Financial success also means taking care of yourself, both physically and mentally. If you find yourself overspending, overdrinking, or overindulging in social media, take steps to reduce those habits and focus on your overall well-being.

Where To Start

When it comes to managing your finances, it can feel like an overwhelming task. But remember, you don’t have to move the mountain in one day. Start by identifying one topic you need to tackle and take the next baby step towards getting it done. A baby step could be finding a file on your computer or sending a two-sentence email to get help. By taking small, manageable steps, you’ll be able to move the mountain, one shovelful at a time.

Managing your finances is an ongoing process that requires regular attention and adjustments. By taking steps to get your finances in order, remembering the basics, avoiding common mistakes, and focusing on your goals, you’ll be well on your way to achieving financial success.

If you want to talk about your next best steps, please reach out.  

Lanning Financial Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

To review, you should start giving your children an allowance as soon as they can count money, usually at four or five years old. Your sole purpose in providing an allowance is to give your children an opportunity to build money skills. Allowance should not be tied to chores. They get an allowance because they’re part of the household; they do chores because they’re part of the household. When it comes to allowance, you get to make the rules and enforce them. You may have values about money that you want your kids to learn. I’ll share what has worked in my house for years.

My son and daughter get an allowance every week, like a paycheck. They receive a dollar for every year of their age — at age 7 they get $7, at age 9 they get $9, and so on. This may seem like a lot of money. Keep reading.

From that amount, my kids are required to give 10%  to charity and put 20% in long-term savings. They get to spend the remaining 70% pretty much as they wish. They have individual places to put this money. For years, we used a divided piggy bank. Coffee cans work just as well. Now we use storage containers. Every week they get an envelope with all their money with the denominations available to make the allocations. You’ll need to help them when they’re young to count and sort the money — it’s a great coin identification and math exercise.

An important note: Make sure they physically handle the money, especially when they’re young, and make them count money when they pay you back for something you bought for them at the store. You want them to have a real life experience of receiving money and watching it leave their hands. We handle actual money so rarely in our society these days. For the longest time, my kids thought that if you needed cash you just went to the ATM and got some. They had no idea that you had to put money in to get money out. So make this reality of having money come into their possession and leave it a part or your kids’ early lives, so they can transfer that experience to the non-cash-oriented world when they’re older.

With all that cash burning a hole in their pockets, sooner or later your children will want to go shopping. Take them, allowing for a significant amount of time to shop, especially early on. You want to make sure they have time to walk all the aisles, pick a variety of things, put them back, choose something else, etc. But leave their money at home. Pay for their purchase yourself, then have them pay you back when you get home. This avoids a lost money crisis and allows for experiences with sales tax, how credit cards work, paying someone back, making change, etc.

Here’s the real trick:  Do NOT judge what they buy. You can set rules and constraints, but after that, hands off. For instance, I didn’t allow my kids to buy toy guns or candy. Sometimes I will put the kibosh on yet another oversized stuffed animal. After that, they can pretty much get whatever they want. This will take much discipline on your part, but I promise it will be worth it.

This plan has incredible beauty that I never saw coming. More on that next time. In the meantime, get your envelopes ready!

The financial planner in this story goes on to explain to his fellow passenger that it’s not the money you need to pass down, but the skills and values that have helped you build wealth. Money can disappear overnight, especially in the hands of those who have no skills to manage it. The old adage applies: Give people a fish and they will eat for a day. Teach them to fish, and they’re fed for life.

I’m a huge advocate of giving children an allowance for this very reason. As a general parenting philosophy, I believe it’s important to let kids have age-appropriate opportunities to screw up when the stakes are low. Direct experience and its consequences are the best teachers. I’d rather my daughter learn that it’s not such a great idea to put the heaviest block on the top of the tower when she’s three years old than wait until she’s 15, when I need her to stack the dishes in the cupboard. It’s the same with money: You want your kids to learn early.

Here’s another belief of mine: We don’t know what’s “sticking” in our children’s brains. Think about it. Memory is such a subjective and selective thing. Almost everyone has a lesson they learned about money that stuck with them. Most of us heard a parent or influential adult say something about money that influenced our beliefs about it, like “money doesn’t grow on trees.” The best thing you can do for your kid(s) is to let them have lots of opportunities to form their own beliefs about money — for example, not spending more than you have, avoiding deficit spending, delaying gratification — so they can form good money habits early. These are crucial life skills, and they don’t get built through our lectures.

I don’t claim to be an expert in this area. Most of my training has come from financial counselor Kathryn Amenta and from my son and daughter, who have been receiving an allowance since the oldest turned five. I encourage all my clients to give their kids an allowance, even if they are much older than that. Better to learn hard money lessons as late as college than when they get their first real paycheck.

How to make it work? Stay tuned.

Pick a date!

You can’t predict the future, but you need to start somewhere. Retiring at 65 is no longer the default. Your target age should stem from your values, so revisit or define them.

Ten years out

This is a time to get a reality check on your financial life and start to envision what retirement will be like.

• Time to take a basic retirement planning class. Look to your local community college, retirement system pension planners, or professional organizations. You’re not trying to become an expert or nail down your plan. But you are trying to figure out what you need to know and what you need to think about.
• How much money have you saved in a 401(k), 403(b) or other retirement account?  Do you need to save more?  Will you need to work longer?  Do you need to adjust your allocations to make them more aggressive or (more likely) conservative
• Will you get a pension? When will you reach the vesting requirements?  How much will you receive? How will it be paid out? In a lump sum, monthly, etc.?)
• Do you have a copy of your Social Security statement? How much can you expect to receive?
• What other assets and investments can contribute to your retirement? Are there any potential drains on your income?
• Start having conversations with your close friends and family members about your vision for your “retirement.”  How do you want to spend your time?  What skills might you want to keep using in part-time or volunteer work?

 Five years out

• Revisit the questions from 10 years out.
• This is a good time to start a journal. Take some of those daydreams you put away and make them more specific. For example, rather than “spend time with grandkids,” you might write “spend two dinners a week with grandchildren.”

 Two years out (or less)

Time to get serious.

1. Make sure your partner/spouse is involved, if you have one and they aren’t already. Communicate and negotiate with them about how you expect to spend your days and money.
2. Hire a financial planner if you haven’t already done so. You want a fiduciary. The Financial Planning Association is a great place to find one.
3. Create a realistic budget. Figure out if you’ll need to work for income or where you may need to cut back on expenses.
4. Figure out when you’ll take Social Security, whether and when you will sign up for Medicare, etc.
5. Turn that “stake in the ground” into a real retirement date. Put a date in the calendar to retire, whether you share this with your employer or not.
6. Get more specific about how you’ll spend your newly found time.

 I often say it’s not about the plan, it’s about planNING. Life happens. Mid-flight corrections are necessary, and you can’t schedule those.  But following this schedule will help minimize the changes and the surprises.

Take the pressure off!

You do not have to have all of the answers now, so start by separating the financial part from the how-to-pass-the-time part. I often tell clients who are “stuck” on how to begin planning for retirement to focus on the first three years and then on the last three years. This takes the stress out of a big question like, “What the heck am I going to do for 20-30 years?!”

For the first three years, write down the collection of projects you want to get done. This often leads to a very satisfying feeling of purpose and direction. It’s like you’re still working, but you’re working on the stuff you want to work on and have been putting off. I’ve had clients travel for a year, remodel homes and take care of grandchildren, to name a few.

Then write down your ideal last three years, which are also usually easy to envision. These are typically slower, easier, quieter. This part also comes with specifics, such as:

• where you’ll live,
• who you’ll rely on for companionship and support,
• how you’ll want to manage your physical slow-down,
• how you want to be cared for and who will take care of you, and
• how you’ll feel at the end of each day

This process helps you figure out how much money or assets you need to set aside to meet these criteria, which will help build the financial part of your retirement plan.

Now for the years in between. I recommend making a list of the skills you want to keep using. This will likely have far fewer specifics than the first or last three years. That’s fine. For instance,

• I’ve had teachers that want to continuing teaching, so they consider tutoring.
• Those leaving executive positions find there are all kinds of nonprofit boards looking for expertise in leadership, development and managing a budget without having to manage employees.
• Some people enjoy mentoring others and find places to create those relationships.
• Talk to others who have retired. Keep your networks going with people who are or are not in the workforce. You don’t need to know exactly what you want to do, but it’s helpful to identify those skills of which you are most proud, most willing to “give away,” and most likely to energize and satisfy you.

In my experience, most people take two to three years to settle into a “retirement groove.” They tackle all of their projects early on, then they hit the end of that list and it takes a while to figure out how to spend their days. Even those who have done a “whole lotta nothin’” in the first year of retirement realize they want to make a change in how they spend their time. This is typical and normal. I also find it takes two to three years for the budget to work itself out. Rest assured, both how to spend time and how to spend money do work out. And both begin with figuring out how to spend the first three years and how to spend the last three years.

A little education can go a long way

It should be no surprise to you if you’re following this blog that I’m not a fan of 401(k) plans.  Most of my clients have them, though.  They need help identifying the best funds, and they need a way to manage those funds.  As you also have probably gathered, I’m a big fan of not losing money and taking advantage of opportunities to make money. 

Time for shameless self-promotion.  If you want to know if you’re in the best performing funds in your 401(k), and if you want to have some guidance as to when you should be taking advantage of the best times to make money in the markets, you ought to check out this tool:  http://lanning.mutualfundmarketalert.com/. Please fill out the sign-in form and watch the video.  I don’t spam.  I don’t sell my database to anyone at any time for any price for any reason.  You may have limited options with your 401(k).  The least you can do is make the most of them.

You can have confidence managing your 401(k)

When I meet my clients with 401(k)s for the first time, most of them have no idea why they chose the funds they did, have no idea whether they’re in the right funds, and have no idea what to do next. So they have done nothing for years and are continuing to do nothing. This does not have to be you. Here’s a game plan for you:

•   Get out your last statement.  Since it’s not been so scary to open it lately, you might actually know where it is.  

•   Check out:  http://lanning.mutualfundmarketalert.com/. It’s the best tool I’ve seen so far to make managing a 401(k) easy.  It’s an educational tool. That’s all. But it might help.  

•   When I tell clients to talk to their 401(k) administrator about their plan, I get either a blank stare or the somewhat rhetorical questions, “yeah, who is that?”  Your company does have a 401(k) administrator somewhere.  Find that person.  

•   Ask the administrator these questions: 
     o   May I please have the list of funds in which I can invest?
     o   How often can I change my allocation?
     o   How do I change my allocation?
     o   Are there any penalties for changing allocations?  

•   Implement the Mutual Fund Analyzer tool. Follow the signal. Make your adjustments. 
 

This is simply an educational tool that might allow you to catch the upsides of more of the markets. You won’t catch the highs and you won’t necessarily miss the lows.  But that’s better than blowing with the volatile wind of this bear market.  And, if you can make some money in the meantime, all the better.

Plan first, tools second, revisit often.

This adage applies to life insurance probably more than any other tool in your financial planning toolbox.  In most cases, you bought it with the intention of keeping it for 20 years or more.  A lot of life happens in five to 10 years, let alone 20.  One of the biggest changes during that time is your own maturity – your thoughts and values change, your needs change, and your desire for security changes.  What made perfect sense and what got your attention 5, 10, or 20 years ago is probably quite different than what you would notice and pay attention to today.  And while you’re going about your life, the insurance industry has probably introduced new products and stopped selling others.

Remember to go back to your plan and then look at the tools (products) you’re using to make those plans happen.  Evaluate whether a particular financial tool is still a viable part of that plan or no longer serving you.  A life insurance review would be valuable.  Most life insurance agents will do these for “free” as a way to sell you something else.  Find an ethical one who will give you an honest answer, even if it means losing a commission.  For life insurance, consider these questions:

• What might I need life insurance for?
• Do I have people who are financial dependent on me?  For how much longer?
• Does the policy I have any cash value?
• How is my health?
• How much do I need?
• How might I use life insurance to meet multiple financial planning needs?  (long-term care, cash reserves, retirement income supplementation, college education funding, etc.)
• How might I use pre-tax dollars to meet those premiums?
• What is the value of my estate and how much might my heirs have to pay in estate taxes?

Once you’ve explored some of these questions in present time, your answers from years ago may have changed.  If so, time to choose a new tool.

Remember that taxes do good things and you do have choices

First, breathe.  Lighten up.  We’ve all been there in one year or another.  Find gratitude.  The taxes you pay do good things – libraries, schools, roads, people to fix the roads, street lights, police, courts, and the list goes on.  These things may not be perfect, but for the most part, they’re functional.

Second, remember that you have choices.  Here’s something else a bunch of you did this tax season:  You funded your qualified retirement plans.  When you looked at the difference in your tax bill based on whether you funded that plan or not, it felt like a no-brainer to fund it.  You thought, “Look at all the money I saved in taxes!”  You probably thought with pride, “I put money away for retirement just like I’m supposed to and look at how much I put away!”

If you had these thoughts, I want you to contemplate these thoughts:  (1) If you believe taxes are going to remain the same or go down for you in retirement, it makes sense to fund qualified plans.  But if you believe taxes are going up, you’ve just “kicked the can down the road,” when taxes in retirement will likely be much higher.  Did you really save money?  Frankly, taxes are on sale right now.  (2) You may have been better off funding a tax-free retirement with after-tax dollars, rather than a qualified plan, so that when you go to retire, you’ll have fewer taxes to pay, less fear about tax deadlines, and a simplified tax return.  Starts to make retirement look even better, doesn’t it?  Remember that you have choices about how you earn, invest, and spend your money.