It’s amazing to me that another year has passed. The irony is that, before you know it, 2017 will be in full-swing and we’ll all be wondering where the time went. The beginning of the year presents us with a refreshing opportunity to take inventory of our financial affairs and look to make sure we’re still on the right path with our future financial goals. If you’re looking for a good place to start, here’s a little checklist to review.

Revisit Contribution Levels – The max contribution level to a 401(k) in 2017 is $18,000 with an additional $6,000 for folks over the age of 50. We find that, more often than not, folks establish contribution levels based on a set % and, as a result, leave precious dollars on the table that they could be contributing and receiving a tax benefit on. For example, let’s say you’re earning $120,000 per year and have set your contribution level at 6%. Maybe this is because your employer is matching the 6% and you are contributing $7,200 per year with an additional match amount of another $7,200. The contribution limit does NOT apply to your employer’s contribution. Therefore, you are missing an opportunity to contribute another $10,000 per year. Of course, this may not be possible due to other financial obligations. Since it is pre-tax and not post-tax contributions, this additional amount will not result in a dollar for dollar decrease in your net paycheck. To put this into real dollar terms, an additional $1,000 per month or $12,000 per year into your 401(k) for 30 years, returning 8%, will net you a cool $1,300,000.00.

2.) Rebalance – In our previous letter we discussed the importance of rebalancing. We believe that it is so important that it’s worth a top spot once again. Rebalancing is the simple act of returning to your initial investment allocation by moving money from your stock side to your bond side or vice versa. For a refresher on the importance of rebalancing you may re-read the blog post HERE.

3.) Review Any Unnecessary High Interest Debt – The first of the year is a great time to revisit high interest debt and set a plan for paying this off. Working professionals are often not big fans of debt, but through the holidays it sometimes becomes a necessity. These pesky little cards can become problems if they are left unattended. Maybe you put all Christmas purchases on a card for travel miles, or maybe it was just a short term cash crunch. Whatever the case, now is a good time to set an exact date by which you’ll be paying those suckers off and moving on.

4.) Pull Your Credit / Cancel All Unused Accounts – I advocate for this once per year but at minimum at least every few years to be safe. It is a federal law that you can get a free credit report from each agency every 12 months, so despite popular belief you do not need to subscribe to a monthly service or pay anyone for these reports. It’s even a bit misleading if you go to the credit rating sites, as they will try and sell you a service for these reports. I suggest the following website which will give you a free report for each agency and not have you pay a cent. I don’t know of another site that is 100% free other than calling the agencies directly. https://www.annualcreditreport.com

Contact Information For the Three Credit Bureaus:

Equifax – www.equifax.com. P.O. Box 740241. Atlanta, GA 30374-0241. 1-800-685-1111.
Experian – www.experian.com. P.O. Box 2104. Allen, TX 75013-0949. 1-888-EXPERIAN (397-3742)
TransUnion – www.transunion.com. P.O. Box 1000. Chester, PA 19022. 1-800-916-8800.

Pull your entire credit history and check for any issues that may be of concern or need to be addressed. Furthermore, if there are still open accounts on your report now is a good time to call and cancel those.

5.) Beneficiary Review – This is a simple check but something that often goes overlooked for far too long. Each retirement plan and insurance policy you have has a beneficiary designation. What this means is that, if something happened to you, these funds would NOT go through your will or estate but rather go directly to the person, or people, you named when you established them. Are these names still accurate? Is Aunt Betty still the one you want getting that hefty 401(k)? Are the kids now eligible to be added directly to an insurance policy? This is a great time to do a quick check of all beneficiaries for any and all plans you may have.

6.) Wills / Trusts – Since we’re talking beneficiaries, it’s a good time to talk about wills and trusts. It’s really quite simple. Do you have one, is it fresh, does it need to be reviewed? Is your executor or executrix still active in your life? Do they know that they are in charge of executing your wishes? Again, this is a good opportunity to review, revise and make sure all information is correct when it comes to your final wishes.

7.) Financial Review – Of course I would be remiss not to mention the first of the year being a great opportunity to review and revisit your overall retirement plan and projections. It has been a good few years in the general market, and after doing the necessary rebalancing and contribution level checks, it’s probably a great time to review your overall road map to ensure that you’re still on the path to achieve your goals. Are more contributions needed? Are the future cash flow needs projected correctly? Are you accounting for inflation accurately? A long term financial plan is paramount in achieving any financial success. The first of the year is a great time to revisit such plans and make adjustments as needed.

Here’s to a wonderful New Year and a healthy and happy financial future!