Financial Resolutions for the New Year

The new year is finally here, providing each of us with a blank slate. This is your opportunity to get the new year off to a fresh start and change your life for the better. Instead of primarily focusing on your diet and exercise in the context of resolutions, shift the focus to your finances. Below, we shed light on the best financial resolutions for 2021.

Determine if You are on Track for Your Retirement Goal

Take stock of your finances as they relate to retirement to get a sense of whether you are realistically on path to retire by your target date. Consider anticipated cash flow along with the current value of retirement assets. Be sure to factor in inflation as well so you can get a sense of whether you will be able to retire by your target date.

Furthermore, if you plan on living life to the fullest, want to travel or if your retirement plans have other “moving parts”, account for those variables when reviewing your current retirement picture. Make the appropriate alterations to get your retirement plan back on track and you will rest easy knowing you have done everything you can to set the stage for truly enjoyable golden years.

Update Your Balance Sheet

People as well as businesses have balance sheets. Add up your assets and debts at the start of the new year to determine if you are in the black or the red as a human being. Update all the numbers and you will have a better idea as to whether you are making progress toward your goal of retiring by a specific date.

Choose and Update Beneficiaries

Use the new year as an opportunity to select beneficiaries and update them on all of your policies. Your designations might be out of date as a result of life events ranging from remarriage to divorce, changing your state of residence, deaths, births, etc. Aside from updating beneficiaries on insurance policies, you should also update them on your will, your retirement plans, annuities and other qualified plans.

Reconsider Asset Allocation

If certain assets in your portfolio perform below expectations while others perform better than expected, your portfolio might end up allocated differently than it was years ago when it was initially created. Revisit your asset allocation to start the new year and alter it as appropriate for the proper rebalancing. This is also an opportunity to reassess your portfolio in terms of risk to gauge whether there is excessive risk, not enough risk or the proper level of risk.

Consider the Tax Efficiency of Your Altruistic Donations

If you contribute to charity, it is important that you do so in a manner that is tax efficient. The overarching goal is to give to good causes in a manner that mitigates tax liability. As an example, a donor advised fund sets the stage for an upfront deduction pertaining to contributions made across several years.

Analyze Your Budget and Spending Habits

Review your spending in the year prior to determine if it matches your expectations. If there were unanticipated hikes, consider whether they were for one-time items or if those increases are likely to continue. Pinpoint opportunities to reduce your expenses, implement those changes in the year ahead and you will most likely emerge from ’21 in a much better financial position.

Any opinions are those of the author and not necessarily those of Raymond James. Past performance may not be indicative of future results.Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a Donor-Advised Fund for federal and state tax purposes. To learn more about the potential risks and benefits of Donor Advised Funds, please contact us.