(THIS ARTICLE IS THE FIRST OF TWO FOR WOMEN | WEALTH | WELLNESS)
The older I get, the more I understand the value of being organized — not just in my personal calendar or “to do” list, but also in my financial life. It seems every year I hear of others who begin January with a resolution to get organized or to make healthy choices, but these ambitions soon fall by the wayside; then it’s time for “spring cleaning” and they vow again to get organized. There are a few reasons I believe it is important to focus on financial organization.
Know What You Have
In short, financial organization means learning the assets and resources at our disposal and having a greater understanding of the debt we are trying to service. How much money do I have in the bank? Where is it invested? How much do I owe? What pending obligations do I have — a child’s education, a trip I’d like to take, a charity I’d like to support?
Understand What You Need
During the process of financial organization, you begin to see areas for improvement. Are you taking full advantage of funding your retirement? Is there a way to pay off debt, or is it even best to pay off debt? Am I taking the right steps to leave a financial legacy through donating to a church or an organization I believe in, or passing down an inheritance to my children? Do I need to update my will or trust documents?
The Peace that Comes with Knowing
Personally, I learned the value of financial organization when my husband was diagnosed with cancer. I’d always been involved in our household finances, but soon realized I would be solely responsible for my financial future. Like many women who face life changes by a spouse’s death, a divorce or other life changes, the peace of mind that I received gave me confidence. I’m not trying to say that everything was perfect and that I didn’t have work to do, but getting a fuller understanding of my financial picture was a major step in the right direction. A high percentage of women (statistics differ, but range from 70% to 83%) are confident in paying bills and managing daily financial tasks. However, many women struggle with taking action when it comes to decision-making around their investments or long-term financial security.
Developing Your Financial Organization Action Plan This is the perfect time of year to really begin an action plan. Why? Because it’s tax time and organizing information for your CPA is the perfect time to develop some great habits.
• Take time to review your W-2 or any 1099s you receive to evaluate your income and earnings.
• Review your 401(k) or IRA to make sure you are taking full advantage of funding those accounts. (The deadline to fund your IRA for 2022 is April 18, 2023.) If you can contribute to a 401(k), you get the added benefit of contributions from your paycheck, which reduces the taxes deducted from your check. Additionally, these accounts benefit from tax-deferred growth.
• Make sure you’re funding your Health Savings Account at the maximum allowed. Each year, the IRS makes an adjustment to the contribution limits, so you should also make a similar adjustment in your paycheck. These contributions are pretax and can compound tax-free; this is a great way to add to your retirement nest egg.
• Make an appointment to review your investments with your portfolio manager. This is a good time to review the performance of your investments and compare them to benchmarks. Also, review your portfolio’s allocations and determine if any adjustments need to be made. While you’re doing this, don’t be bashful! Ask questions, keep good notes and remember this is your time to see if you are on track to achieve your long-term financial goals.
• Finally, it’s important to understand your complete financial picture. You can use a number of widely available online tools, or even a basic spreadsheet, to form the basis of your financial statement. At Argent, we often work with our clients to develop a financial plan that measures their progress and provides an analysis of how their money is working for them. This plan can encompass a person’s short- or long-term financial goals and help them understand the capital required to meet those needs.
In Part 2 of this series, I’ll review some practical steps on financial organization. I’ve taken the time to implement many of them in my own life and I’ve seen greater efficiencies with time and resources. As a woman, I want a seat at the table and want the peace of mind of knowing I understand my finances and have the best team to help me marshal my resources. If you could benefit from financial planning or need advice related to management strategies, please contact any of AmeriTrust’s professionals at 888.678.8970. We’ll be glad to help however we can.