Make Financial Resolutions The One You Keep This Year

Before we’re able to plan ahead for how 2016 will be different, let’s first evaluate what took place in 2015.  What changed? Did your family welcome a new child? Did you experience the joy of marriage? New job? New home? Retirement? Divorce? Taking inventory of the previous year and understanding how those changes impact you, your business and your loved ones, are the guiding force behind properly planning for the year ahead. New year’s resolutions come and go too easily. The new faces you’re seeing at the gym in January will probably be gone by Valentine’s Day. While many resolutions are terminated entirely too early, if nothing else, let this be the year you get your financial home in good order.

Savings: What happens if you or spouse looses their job tomorrow? Do you currently have immediate access to the cash necessary to get your family through the next 6 months with no new income coming in?

Life Insurance: When was the last time you reviewed your existing life insurance coverage? Any time needs and goals change, it is important that your life insurance mirror that change. A new child, spouse, home, or significant change in income are all factors that should spark a review to ensure your loved one’s financial future is properly protected.  

Retirement Savings: A 401k & IRA are great tools, but not without limitations. If your current level of income precludes your participation in a Roth IRA, life insurance can help you create tax-free retirement income without the restrictions of traditional retirement planning vehicles. 

Why It Pays To Plan Ahead

While waiting in line to get coffee this morning, I overheard the couple in front of me discussing their challenges from the prior evening. Not marital challenges; as they appeared to be the picture of happiness holding hands while patiently waiting for their morning caffeine. They’re troubles were as a result of last night’s dinner experience. Not having reservations on a Friday night, the couple had entered a neighborhood restaurant recently having received laudable accolades from local critics. As they entered the space their senses were overcome with the aroma of fresh herbs and homemade desserts while their eyes remained intensely focused on the rack of lamb being delivered to a nearby table. As enthused as this couple was by the prospect of dining here, their dream was quickly squashed as the host shared news that no table was available tonight, or for the next 3 weeks. I do not know where they ended up for dinner, but they continued to discuss how next time, they will plan ahead and make reservations prior to appearing at the city’s newest hotspot on a Friday night. Planning matters; and it matters in all aspects of our life. Whether we were denied dinner service at a restaurant of choice due a lack of planning or find ourselves struggling to make mortgage and education payments following the loss of a spouse, having a proper plan in place can help ensure that when the time comes, you will not only be prepared, but also able to face what lies ahead with confidence.

Time For A Policy Review

When was the last time you reviewed the balance and performance of your retirement savings or brokerage account? This is a question I have posed to prospective clients and peers over the past few months. Answers have been quite consistent; with most individuals having done so within the past month or two. As the market fluctuates and goals change over time, it is important to review and rebalance those account holdings to ensure you are planning properly. When I ask the same question to individuals about their life insurance, the result was dramatically different and quite startling. Less than 5% of those I inquired with put any ongoing thought into their life insurance outside of when they are making premium payments. Life insurance is a highly effective planning tool when implemented properly. It can provide protection for loved ones, tax fee liquidity and ensure businesses continue to flourish during transitional periods. With so much at stake, why have less than 5% of individuals reviewed their insurance needs since their current policy was originated? The most common response is that, “I did not know I should review it,” or “my agent never brought up the topic.” While agents should absolutely be proactive in the ongoing management of their client’s insurance policies, clients also need to recognize trigger events for when their current coverage may no longer be adequate in order ensure they have proper coverage when circumstances change.

Below are a few key examples of life events that should prompt a review of your current coverage:

·      Have you recently purchased a new house?

·      Have you welcomed a new child into your family?

·      Are you caring for an aging relative who relies on your financial support?

·      Have you recently gone through a divorce?

·      Have you recently started your own business?

·      Do you have a term life insurance policy approaching the end of its level premium period?

·      Have you recently retired? Do you plan to retire in the near future?