financial planning checklist PAX Financial Group

Your 7-Step Annual Financial Planning Checklist

Financial Planning, holistic financial planning, financial advisor San Antonio Oct 21st, 2019 by: David Alvarez

Many people get regular eye exams, dental cleanings and/or physicals once a year, but what about an annual checkup for their finances? Unfortunately, it usually takes a major life event – such as having a baby, getting married or experiencing a death in the family – to sit down and review your finances. I say unfortunately, because this is a reactive way of managing your money, and it often hinders you from creating real wealth.

Even if you’ve had a “normal” year with no surprises, it’s good to check-in on your progress to see if you’re on track to reach your goals. An annual financial check-up can also help keep you motivated as you journey toward financial freedom and may unveil any hidden hiccups that may be slowing down your progress.

Besides not scheduling an annual financial review, another common mistake people make is having a review, but not checking for everything that they should be. To help, here’s PAX Financial Group’s annual financial planning checklist, which covers 7 key areas to review.

If you need help with any of these areas, contact us to see how we can help.

 

Financial Planning Checklist

1. Spending

The first rule of personal finance is, spend less than you earn and save the rest. This simple habit is the foundation of true wealth building.

If you haven’t made much progress toward your financial goals this year, evaluate your spending to see if it’s the culprit. How?

  • Create a budget (use this helpful and complimentary budgeting worksheet)
  • Calculate your total income (include your salary, rental income, any side-hustle money, child support, alimony, etc.)
  • Calculate your spending (fixed monthly expenses, variable expenses and discretionary spending)
  • Identify pitfalls in your spending (services you don’t use or could cut back on, discretionary spending, etc.)

 

Ready to put a comprehensive financial plan into place? Contact PAX Financial Group to schedule a free, no-strings-attached financial check-up.

 

2. Debt

Debt is powerful – it can ruin your happiness and prevent you from building wealth. Free yourself of debt’s tight grip by creating a concrete plan to destroy it. Try to pay off debt with the highest interest rate first, then work your way down to the lowest:

  • High-interest consumer debt (credit cards and personal loans)
  • Low-interest consumer debt (appliances, computers, furniture, etc.)
  • Student loan debt (interest here is typically lower than consumer debt interest)
  • Collateralized debt (houses and vehicles)

If you have an overwhelming amount of debt to tackle, discuss your specific situation with a financial advisor. You may be able to work with your credit lenders to negotiate a lower interest rate with them. There’s no guarantee they’ll say yes, but it could save you thousands in interest if they do.

(PAX Financial Group incorporates Dave Ramsey’s philosophies into our coaching. Learn about his “snowball plan” for paying off debt.)

 

3. Taxes

We’ve all heard the saying, “It costs money to make money,” but have you considered ways to minimize your tax burden? Talk with a financial advisor about:

  • Maximizing retirement contributions (take full advantage of these tax-saving accounts)
  • Giving to charity (this can count as an itemized deduction and may reduce your tax burden)
  • Harvesting losses (you may be able to reduce your tax burden by selling investments that produce a loss)
  • Reviewing other potential deductions and credits (these vary based on your occupation, residency, income streams, financial obligations, etc.)

 

4. Insurance

Insurance needs change as your life changes. Adequate coverage this year may be too much coverage (or too little) next year.

During an annual financial checkup, review policies for the following:

  • Health insurance (Do you need to adjust coverage or add/remove someone from your policy?)
  • Life insurance (Did your number of dependents or household responsibilities change this year?)
  • Long-term care insurance (Is it time to buy this for yourself or your aging parents?)
  • Disability insurance (Would your family be alright without your income if you were temporarily incapacitated?)

 

5. Investing

Reviewing your taxable investment accounts once a year is wise to make sure your strategy and performance align with your goals. For example, you may want to adjust your investment strategy (make sure your risk tolerance is the same).

 

6. Retirement

Retirement and investing go hand-in-hand. In addition to the investing checklist above, you should also:

  • Evaluate your retirement planning progress (ensure you’re hitting the right retirement milestones)
  • Review any retirement plans you have, such as a 401(k) or an IRA
  • Make sure you’re maxing out retirement contributions (maximum limits vary by account type)
  • Look into catch-up contributions (if you’re age 50 or older)
  • Consider Social Security claiming strategies (if you’re age 50 or older)

 

7. Estate Plan

Many people skip this step – they establish an estate plan, but never review it. But, if you’ve experienced a major life event or no longer have the same people in your life as you once did, it may be time to update it. Some common pieces to evaluate include:

  • Durable Financial Power of Attorney (this person makes financial decisions on your behalf should you become incapacitated)
  • Medical Power of Attorney (this person makes medical decisions on your behalf should you become incapacitated)
  • Healthcare directives (this includes end of life decisions)
  • Executors, trustees and guardians (make sure these people are still a good fit)
  • Beneficiaries (you may need to update these if you’ve had a child, lost a loved one, gotten remarried or divorced)

 

Seek Help! Don't Do It Alone!

Properly reviewing your financial picture is just as important as setting up a financial plan in the first place. Leaving even one piece of the puzzle out can be detrimental to your long-term financial future.

Reviewing your finances once a year can be an overwhelming process, but you don’t have to do it alone. Find a trusted financial advisor in your area who specializes in financial, retirement, estate and tax planning. If you’re in the San Antonio area, contact PAX Financial Group to see if we’re a good fit.

 

Retirement Guide - PAX Financial

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

David Alvarez

David Alvarez

David Alvarez, CFP, is the son of Armando and Teresita Alvarez, both of whom immigrated to the U.S. from Cuba as children in 1962. David grew up in San Antonio, attending St. Gregory the Great Catholic School and Antonian College Prep. Following high school, David went to Northwestern University where he studied Economics and History, played baseball and met his wife, Meredith. After more than a decade spent in New York and Chicago, they moved back to San Antonio in 2012. David and Meredith have two boys, two dogs and no idea what they will do if their house is ever quiet.