As we reach the midpoint of the year, now may be an ideal time to pause and conduct a thorough financial review. At SignatureFD, we believe wealth management is about helping our clients achieve a holistic sense of well-being. Our Net Worthwhile® approach helps empower you to use all elements of your wealth for a financial design to help you to Grow, Protect, Give, and Live your wealth to the fullest.
Why is a Mid-Year Financial Review Essential?
In the hustle and bustle of daily life – balancing work, family, and personal responsibilities – personal finances often get pushed to the back burner. It’s common for new clients to regret that they didn’t seek financial guidance sooner. We often hear them say, “I wish I’d met you years ago. I would have had a better plan for my money and might not have been as stressed about my finances.”
Time flies, and financial uncertainties can make it easy to feel overwhelmed without a plan. That’s why we emphasize the importance of conducting regular financial check-ins. Our GPGL design – Grow, Protect, Give, Live – serves as the foundation of our approach:
- Grow: Develop a financial plan and allocate assets to maximize your chances of achieving your goals.
- Protect: Safeguard your accumulated net worth and future earning potential to benefit your family.
- Give: Create intentional plans around generosity, whether gifting money to family and friends or the causes dearest to you.
- Live: Activate assets on your balance sheet so you can confidently use them to support your family’s current and long-term goals.
The Role of Purpose in Wealth Management
Beyond merely accumulating assets, we believe it’s crucial to understand the “why” behind your investments. Purpose-driven wealth management helps ensure that your financial decisions align with your personal and family goals. Without a clear purpose, market fluctuations can lead to irrational decisions, especially during stressful times. With an intentional design, you can remain confident in your plan, even when the market experiences downturns.
Aligning Financial Goals with Life Priorities
Financial goals can vary widely depending on one’s stage of life. At SignatureFD, we work with clients across all age groups, helping them align their financial goals with their life priorities. For example:
- 20s to 30s: New parents might focus on establishing a will and securing life insurance while also saving for a home, car, and retirement.
- 30s to 60s: Clients often seek to minimize income taxes, ensure their family’s financial security, and plan for retirement.
- 70s+: Concerns typically shift to wealth maximization, health care planning, and enjoying life through travel and charitable giving.
- 80s+: The focus is usually on updating wealth transfer plans and staying compliant with current estate tax laws.
Regular Review and Adjustment of Financial Goals
Our most successful clients automate their financial goals whenever possible. Effective strategies include automating retirement savings, 529 plans for education, and utilizing lump sum compensation such as annual bonuses for financial goals. Regular reviews and adjustments, particularly during life changes such as marriage, divorce, or a family member’s death, can help you keep your financial journey heading in the right direction.
Distinguishing Between Essential Expenses and Discretionary Spending
We’ve found that understanding the difference between essential expenses and discretionary spending is vital. Essential expenses cover your regular living costs, while discretionary spending includes goals like travel, gifts, and second homes. You can make more informed decisions about discretionary spending that enhance your life by quantifying your regular expenses.
Preparing for Unexpected Financial Challenges
Building an emergency fund and incorporating contingency plans into your financial design helps prepare for unexpected challenges. Whether covering assisted care for aging parents or dealing with an unexpected healthcare emergency, having a cushion helps safeguard against unforeseen expenses so they don’t compromise your overall well-being.
Mid-Year Financial Checklist
As part of your mid-year financial check-in, here is a checklist to ensure you are on track with your financial goals. Not every item will apply to your situation, but this checklist highlights a few items you may want to consider:
GROW
- Check current contributions to 401(k), IRA, and other retirement accounts. Increase contributions if you don’t anticipate maximizing your contributions for the year.
- Evaluate if converting a traditional IRA to a Roth IRA is beneficial and review potential tax implications and benefits.
PROTECT
- Check your Flexible Spending Account (FSA) balance and plan for necessary medical expenses to utilize funds effectively. Verify if your plan allows for a grace period or rollover.
- Review emergency reserves to ensure the amount is appropriate and the interest rates you’re receiving are optimal.
- Check your Health Savings Account (HSA) contribution limits and increase contributions if needed.
- Review Medicare options and prepare for Open Enrollment later in the year.
- Confirm beneficiary designations for all life insurance policies are up-to-date.
- Ensure all long-term care and long-term disability Income policies are current and paid up.
GIVE
- Review current contributions to 529 Plans or other tax-advantaged accounts. Consider adjustments based on annual gift exclusion ($17,000/person or $34,000/married couples).
- Review current estate planning strategies and consider transferring assets to take advantage of the estate exemption ($12.92 million/person).
- Review charitable giving strategies, including the “charitable bunching” strategy using a Donor-Advised Fund (DAF).
- Consider making Qualified Charitable Distributions (QCDs) from IRAs directly to charities (up to $100,000 for individuals 70.5+).
LIVE
- Assess cash needs for the second half of 2024 and plan withdrawals accordingly. Consider timing and flexibility of withdrawals to optimize tax efficiency.
- Confirm Required Minimum Distributions (RMDs) status and ensure you are on track to meet the distribution requirements by year-end. Assess if any additional distributions are needed to avoid penalties.
- Plan and budget for any holiday or year-end travel, vacation, or other experiences.
Conducting a mid-year financial check-up can help you stay on track with your financial goals and obligations. By proactively addressing these areas, you can optimize your financial strategies and set yourself up for a successful second half of the year.
If you want to learn how we can collaborate with you to design a wealth management blueprint that helps you Grow, Protect, Give, and Live your wealth to the fullest, please contact us. Together, we can help you chart a course toward your Net Worthwhile® and create a financial plan tailored to you.
