Seasonal Financial Planning

As we turn the calendar page from September to October in Vermont, we prepare for the changing foliage colors, weekends cheering for our favorite football team, apple picking, hayrides, and of course financial planning. While we carve pumpkins into Jack O’Lanterns, it is important to remember that a strong financial plan is an ongoing cycle much like the changing of the seasons. It can be daunting to think about all one needs to create and maintain a successful plan. Instead of trying to do everything at once, try using the theme of each season to outline the components of your plan.

Spring suggests new beginnings, a fresh start, and planting seeds you hope will flourish and grow into something you will enjoy later. Is there a better time than spring to dust off that budget you have been meaning to balance as part of your New Year’s resolution but somehow lost track? While you examine your budget, look at any loans and debt you are carrying and plan to pay off balances with the highest interest rates first. If your emergency funds can cover you for six months, well done; if not, find a way to replenish this vital asset. Taxes will be due, or a refund may be coming. Take the time to understand if there are any decisions you can make today, or later this year, to help manage your tax burden. One of those items could be a contribution to your IRA. If you haven’t filed, it is not too late to make a contribution count for the prior year.

In summertime, everyone is thinking about vacations, relaxation, and travel, so focus on those planning items you can take with you to the beach. Run an annual credit report and read it while you bask in the sun. It’s important to look for anything out of the ordinary such as new accounts or large swings in your credit score. If you see a discrepancy, fix it. Close an account that you no longer use. Perhaps even as important as reviewing your credit report is freezing your credit. Don’t wait for the next data breach to happen. Take action to protect yourself now. Finally, if your summer break is feeling like a preview of what retirement might look like, check your retirement accounts. Review growth rates, contribution amounts, and project if what you are doing today will support the lifestyle you want when you retire. If changes need to take place, make them now. Another year of delay can have major implications on compounding growth. Check your beneficiaries as well.  

As children head back to school, this is a good time to think about how to pay for their college years. While several options are available, 529 plans remain popular for their flexibility, tax-free growth, and program benefits. If you have 529 accounts for your children or grandchildren, check the balances and contribution amounts to ensure you are on track for funding goals when college years and expenses begin. As Thanksgiving arrives and we take time to think about all we are thankful for, consider the ways that you give. Charitable giving can take myriad shapes; volunteering your time, raising money for causes you believe in, or donating to charities that are close to your heart. Take the time to examine what you have contributed to charities and discuss with your manager if it is a good time to donate appreciated stock or add to a donor advised fund. Your philanthropic goals may also be part of another planning element, your estate plan. Consider what changes have taken place since you last updated your will, trust agreements, or powers of attorney. If you can think of changes that need to be formalized in writing, schedule a time to talk with your attorney and put everything in order.

After the firewood is stacked and the last pile of leaves has been raked away it’s time to think about what to do to prepare for winter and the end of another year. Before the first snowflakes fall, consider your tax position. It is not too late to reduce your tax bill by offsetting investment gains with losses. If you are required to take a distribution from your retirement accounts each year, make sure to meet the minimum to avoid penalties. If you are required to take a distribution, want to minimize taxes, do not need the funds, and are charitably inclined, consider a Qualified Charitable Distribution (QCD). QCDs have limitations, but if you issue distributions from your IRA directly to charitable organizations, they get the benefit of the funds while you do not have to pay tax on the distributions, all while satisfying your annual requirement. Once your year-end checklist is complete, wrap up the season with a review of your investment portfolio and insurance coverage. Be sure your asset allocation and investments match your risk and return expectations and consider if you are appropriately positioned for various future market cycles rather than just reviewing past performance. While examining risk in your investments, consider the risks you may encounter personally. Minimize the risks that you can and transfer the risks that may be infrequent but potentially costly to insurance. Set up a time to meet with your agent and discuss if your coverage is adequate. For example, ask if the replacement cost for your home is sufficient in your policy given where construction and material prices are today.

It is never too early or too late in the year to look at your financial plan, discuss it with your family, and act by meeting with your Wealth Manager, accountant, insurance agent, or estate attorney. Hopefully, by chipping away at different components of your plan throughout the year, it will feel easier to manage and keep up to date. Your financial plan will change, and each year will bring with it new challenges and new opportunities. Be prepared so that you can make decisions with confidence and enjoy the trappings each season bestows.

Disclosures

This material is solely for informational purposes and shall not constitute a recommendation or offer to sell or a solicitation to buy securities. The opinions expressed herein represent the current, good faith views of the author at the time of publication and are provided for limited purposes, are not definitive investment advice, and should not be relied on as such. The information presented herein has been developed internally and/or obtained from sources believed to be reliable; however, neither the author nor Manchester Capital Management guarantee the accuracy, adequacy or completeness of such information. Predictions, opinions, and other information contained in this article are subject to change continually and without notice of any kind and may no longer be true after any date indicated. Any forward-looking predictions or statements speak only as of the date they are made, and the author and Manchester Capital assume no duty to and do not undertake to update forward-looking predictions or statements. Forward-looking predictions or statements are subject to numerous assumptions, risks and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking predictions or statements. As with any investment, there is the risk of loss.