It’s easy to forget the basics. At times, we get so caught up in work, family, friends, and anything life throws at us that we overlook basic planning items. These financial tips are created specifically for consultants and the busy lives they live. Here’s the list:
1. Insurance Evaluation
When’s the last time you spoke with someone about your life, disability, long term care, auto, or home insurance? Life changes quickly and our coverage needs to be updated to reflect those changes. This is by far the most common area neglected in a comprehensive financial plan. Talk with a qualified professional to make sure you’re covered properly.
2. Estate Plan
What do Jimi Hendrix, “Sonny” Bono, and Pablo Picasso all have in common? According to LegalZoom, they all died without a without a will¹! The settling of the Picaso estate alone cost $30M. Yikes! Having a proper estate plan in place is similar to having insurance to protect your next of kin and loved ones. The estate plan is for their benefit, not yours. Talk to an estate planning attorney to see what needs to be done.
3. Mortgage Evaluation
At this moment (January 2022), interest rates are still at all time lows. This means cheap debt for your mortgage. Are you taking advantage of our low rate environment? It might make sense to refinance your mortgage (or pull the trigger on a new home!). Talk with a mortgage broker to see what your options are.
4. Health Savings Account (HSA)
My all time favorite account, the HSA. Money goes in tax deductible, grows tax deferred, and comes out tax free if used to pay for qualified expenses. HSAs are only available for high deductible, low premium plans (also called high deductible health plans (HDHP)). Does it make sense to switch to a HDHP? It might make sense if your out of pocket expenses are minimal. Talk to a qualified professional to see if it makes sense for you.
5. Roth Savings
The Roth portion of either your 401(k) or Roth IRA goes in on an after tax basis with the idea that money will be tax deferred and tax free come retirement time. Too often I see folks miss this opportunity in either their 401k (or with backdoor Roth IRA contributions) and they miss out on the growth of tax free assets. How much should you be saving in the Roth or pre tax portion (Hint: Set up a framework for deciding)?
6. Concentrated Assets
Are you receiving RSUs as part of your compensation package or are you participating in an ESPP? It’s easy to accumulate company stock quickly (through Booz Allen or Accenture for example) if maximizing the ESPP and receiving a hefty load of RSUs. A concentrated position of 20, 30, or 40% of your net worth is risky should anything happen to your company. Consider an investment plan that will address this issue in a tax efficient manner.
7. Accountant
I’ll be short: Use an accountant to do your tax preparation and filing! The pain of having to deal with the IRS is not worth the hassle of self filing. As Donald Rumpsfeld once said, there are “unknown unknowns—the ones we don’t know we don’t know”²– as in, there are items of the tax code you might not know exist that an accountant can help shed light on, potentially saving you money (or a future headache!).
The Takeaway
The purpose of this list is to not only shed light on areas consultants tend to neglect, but to reiterate how important creating a team around you is to financial success. As consultants know, the most high functioning organizations in the world rely heavily on a team based approach. The personal finance world should be no different. Relying on a team of professionals such as an insurance agent (#1), an estate planning attorney (#2), a mortgage broker (#3), investment advisor (#4, 5, and 6), and accountant (#7) will free up your most precious asset: TIME.
Talk with us today about forming a team of professionals around you that can take you to the next level!
(1) https://www.legalzoom.com/articles/10-famous-people-who-died-without-a-will
(2) https://archive.ph/20180320091111/http://archive.defense.gov/Transcripts/Transcript.aspx?TranscriptID=2636
