By Rebecca Robinson
The change of seasons ushers in a chance to tidy up the cobwebs of winter and prepare for the promise of sunnier styles. Many of us will take advantage of the transition to shift our closets away from cozy wool toward fresh looks.
At the same time, we can likewise do some spring cleaning of our “financial closets” to find opportunities to spruce up for our future goals.
Here are six ways to start tackling the project and building your wealth wardrobe:
1. Evaluate what still fits.
Take out the pieces of your financial closet and have a look at them. Do they still fit? We make financial decisions over time and make choices that fit in the moment. But what may have been the right investment strategy, estate plan, insurance, or banking products in the past may not fit your current situation.
Let’s start with our use of debt, for example. As your wealth has accumulated over the years, you may use debt differently. At some point using debt may less about needing it and more about utilizing it as a resource. Work with a banker to make sure you’re using the right credit card or banking products. What was right for you a decade ago might not be ideal now, so it’s time to explore your options.
You’ll also want to ensure your investment strategies still fit with your evolving goals. Consider your risk tolerance, investment horizon, and available savings vehicles — such as Individual Retirement Accounts (IRAs) and 401(k) plans for cash flow during retirement as well as 529 plans for educational savings. If you’re nearing retirement, for example, it might be time to shift your investment mix.
2. Don’t be afraid to purge and consolidate.
Expert home organizers such as best-selling author Marie Kondo remind us to let go as we clean up. In the case of our finances, this can be really important. Maybe you have an old 401(k) with a former employer. It might make sense to consolidate that account and any other plans collecting dust into your current 401(k) or IRA.
Scrubbing out your financial closet can include consolidating providers and policies. This simple act will reduce risks of loss, mismanagement or confusion for your heirs. Decluttering your records and accounts provides value to you today, and also to your loved ones tomorrow.
3. Re-think trends.
It’s easy to get caught up in the trends. But they can be outdated almost as soon as they come off the rack. So as you spring clean, review your financial approaches to make sure they’re addressing your short, mid- and long-term goals. Look to the timeless classics, such as diversifying your investment mix, and focusing on steady growth rather than fast fashion returns.
Like a wardrobe stylist, a trusted financial advisor can help you recognize fads from the standards. Work with someone who can look at your complete picture, rather than someone who just wants to sell a hot product.
4. Look for what’s missing.
Take a step back and notice any gaps in your financial closet. Have you reviewed your property and casualty insurance to make sure all of your assets are covered? What’s important to you is important to insure. Often, individuals find they are underinsured, but only realize the gaps in coverage until a loss occurs.
To manage financial risk, it’s ideal to review life, disability and long-term care insurance to make sure you have adequate coverage. You’ll want to work with a professional to find the right balance between coverage and cost.
Other gaps might be found in your workplace. Review your employer benefits to make sure you’re taking full advantage of vehicles like health savings accounts, matched 401(k)s and deferred compensation options that can position you for a comfortable retirement.
5. Make a plan before you step out.
As the picture becomes clear about the “look” you want achieve, remember to set a plan. Regardless of financial status, everyone can benefit from an estate plan to help safeguard their assets and reduce stress on loved ones.
Without an estate plan, important decisions about your assets will be made by state law and probate courts — and these decisions may not be aligned with your interests or your family’s needs.
While you’re at it, think about medical and financial powers of attorney so that you are designating who is making important decisions for you if you are unable.
6. Coordinate it all together.
Often, we look at single pieces in our closet that stand alone great, but don’t quite work when put together with others. It’s the same thing with your financial plan — everything should coordinate.
A qualified advisor with a financial planning focus can help you pull all of the pieces together. An Amegy Wealth Advisor can give you realistic feedback on your ability to meet your goals and serve as an accountability partner to see you succeed. Find more information at amegybank.com/wealth.
Rebecca Robinson is a CPA, CFP® and Executive Vice President and Director of Zions Wealth Management.