Folks who own or run a business can sometimes neglect their personal finances. It pays to sit down from time to time and review what you’ve done so far — and what you can do better. Here are some suggestions to help assure your financial well-being.
Set financial goals. Decide where you’d like to be financially, both in the short term and in the long term. With specific monetary goals, you can check periodically to make sure you’re on track. You may need to adjust how much you’re saving and investing to meet your goals.
Get the most benefits from tax-deferred savings plans. These include IRAs, 401(k)s and Keoghs. Check the contribution limits for the current year, as these can change. If you’re nearing retirement, think about how you’ll be making withdrawals from tax-deferred accounts. Learn the rules for required minimum withdrawals.
Create an emergency fund or establish a line of credit. You want to be able to get your hands on cash if something unexpected comes up. Being sure that can cover three to six months of living expenses will keep you from tapping into investment accounts or selling other assets.
Plan for a child’s or grandchild’s education. Look into a variety of tax-deferred savings, tax-favored loans, and tax credits that may be helpful.
Review your stock portfolio. This is especially important in times of stock-market turmoil. You may need to re-balance your portfolio — either increasing the percentage of equity investments (stocks) or increasing the percentage of bonds. Also, consider whether to sell an item at a loss. This can help you offset gains from more profitable investments.
Maintain adequate insurance. Insurance can help protect you and your family from financial disaster. Do you have sufficient life insurance? Knowing that your family is protected will give you peace of mind. Look into term insurance, which is relatively inexpensive. Also, consider disability insurance in case you can’t work for an extended period. An umbrella policy is often a good idea. Other insurance coverage to review: homeowners, car and health insurance.
Keep your credit costs under control. It may be time to refinance your home mortgage, or to switch your credit card to another company. And check your credit report annually to make sure it contains correct information.
Re-visit your estate plan. Make sure your will, trust and power of attorney are up-to-date. If you don’t have an estate plan, see your lawyer to discuss your needs. Make sure that your life insurance policies have named the correct beneficiaries, and that you’ve taken proper steps to fund your living trust. See that your paperwork is well organized so that family members can step in and handle your finances, if necessary. Consider signing a living will or medical power of attorney. This will authorize someone close to you to make medical decisions for you if you’re unable to make them yourself.
Look into tax strategies. A certified public accountant can help you make the most of tax deductions and credits. Tax laws change, so last year’s strategies may be out of date. Take special care if your estate plan is designed to reduce or minimize estate and gift taxes. Congress changes the exemptions from time to time, which may make it necessary to revise your current documents.
Have a succession plan for your business. If you die, you want to make sure that your business will be smoothly transferred to your family, co-owners or valued employees. You might want to have a buy-sell agreement in place, possibly funded by life insurance.
Think about recent changes in your family. A birth, death, marriage or divorce in the family can affect your financial plans. If so, you’ll need to make appropriate adjustments.
