“The key to financial fitness is preparation. Whether preparing for retirement, college for your children, a dream vacation home or even the unexpected, everybody needs to take time each year to reexamine what they’re doing and the progress they’re making in order to reach those milestones,” says Christopher Pinkerton, senior vice president, North American sales and marketing for Foresters, a leading fraternal benefit society that assists people in achieving financial security.
Saving Money
A good rule of thumb is to set aside three to six months of salary for unexpected events such as a job loss, major car repairs or large medical bills. In addition to preparing for the unexpected, identify ‘known expenses’ that are coming up such as college costs, a new home, new car or a new addition to the family, and build them into your budget. Give yourself adequate time to save for these expenses a little each month. Before you know it you won’t even feel as if you’re saving and you’ll be a step ahead.
Taxes
They’re definitely something you can count on year after year. Review the withholding on your paycheck and adjust it if necessary. Take time to gather and sort out your receipts from the past year to identify tax deductions. While you’re at it, set up an organized system to keep track of receipts for next year, so you don’t misplace something and miss out on any deductions moving forward. And speaking of deductions, this is also a good time to determine which charitable contributions you made in the previous year, and which ones you plan to make in the coming year.
Retirement
Review the status of your 401(k), IRA and pension plan. If appropriate and consistent with your savings goals, sign up for any automatic increases offered through your employer. Take note of your retirement plan status at this stage of your life — are you on track for growth, or is it time for an investment change? Even periodic small changes can have a big impact on your ability to build strength through investments.
Mark your calendar to review your investment performance with a financial advisor each quarter.
Estate Planning
It is a good idea to plan for your family’s financial security. Do you have a will, trust or health care directive? If so, review the beneficiary designations to make sure the plans reflect your current wishes. Ensure that you have a guardian named for your children, and that you’ve outlined how your assets will be transferred.
Also at this time, consider whether there will be significant tax consequences for your survivors, who has title to what property and who will oversee your estate plan. If you don’t yet have these items in place, an estate planning professional can help you sort things out, saving your family added complications upon your death. Your family will appreciate your forethought and be comforted by knowing that you made plans for them.
Life Insurance
An important step in financial fitness is financial security, and life insurance can be the backbone of financial security.
Remember, life insurance is the piece of the puzzle that makes sure your family can keep the house, send the kids to college or sustain the family’s livelihood if there’s a loss of one or both income providers. Some life insurance products can also provide savings and investment options for a home, a family bequest or a dream vacation.
Conventional wisdom recommends households should carry anywhere between two to 10 times your annual income in life insurance.
If you don’t have a life insurance policy — or any of the other financial plans mentioned above — now is the time to get those parts of your life in shape. With the help of qualified professional advisors, you can put a financial fitness plan in place and prepare both you and your loved ones for the future. www.foresters.com
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