Taking Stock at Year End
This week’s guest blogger is Stephen Paul, CPA, a staff accountant at WithumSmith+Brown. 
Ready or not, we’ll be flipping the calendar before you know it. In between holiday shopping and sipping eggnog by the fire, take time this season to ponder your grand plans in life, and how you’re going to fund them. Along with the customary year-end tax planning considerations (see the previous post in this blog, and www.withum.com), the coming New Year provides an opportunity to examine your financial picture holistically. Review the prior year, solidify your goals for the future, and move confidently towards your unique definition of financial success.
Whether you work with a financial advisor or you’re a do-it-yourself guru, here’s a list of critical documents we should all have in place and review on a regular basis.
Personal balance sheet – a complete list of all your assets, liabilities, and net worth.
Financial documents inventory – don’t lose track of what’s out there. Include:
- Insurance policies
- Custodial accounts for children
- UTMAs
- College 529 Plans and Education Savings Accounts (ESAs)
- Estate planning documents
- Will
- Financial Power of Attorney (POA)
- Medical directive
- Family education – make sure your loved ones know who to contact in times of need.
- Executors and trustees named in your estate planning documents
- Attorney, accountant, financial advisor, insurance broker
- Contact information for each and location of documents
Investment policy statement (IPS) – widely used by financial advisors, even DIY folks should invest time in writing an IPS for themselves. You’ll be impressed with the results when you hold yourself accountable to your goals. Include:
- Clear and specific financial goals – don’t just say “save for retirement and down payment on a vacation home”; rather, “save $20k/year for the next 20 years for retirement and $5k/year for 8 years for a down payment on a vacation home.”
- Outline what investments are appropriate to meet your stated goals; know your risk tolerance and what you’re comfortable investing in.
- Define the target risk and return of your portfolio
- Set a benchmark to compare to your portfolio performance
Investment performance analysis of the past year – how are you doing compared to your goals and your benchmark?
Goals-based cash flow projections – are you going to reach your goals? Projections can help guide you.
Personal budget – your behavior in the present will make the most significant impact on your future goals.
While this list might seem daunting, once you invest the time and energy to compile it you’ll spend much less time in the future reviewing and updating the documents. You’ll also be giving yourself a greater chance of reaching your goals. And that, my friend, is the best holiday gift you could receive.
Author: Stephen Paul, CPA
