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A Financial Planning Checklist For The New Year

January 25, 2012

With the new year comes new resolutions. Many of you have likely made a resolution to improve upon some aspect of your financial plan. Below is a list of questions designed to help you determine which areas of your financial plan may need improvement:

SPENDING PLAN • Do you periodically categorize your expenditures and set budgets? • Do you periodically look for painless ways to reduce your spending and increase your cash flow?

DEBT MANAGEMENT • Have you obtained a copy of your credit report within the past year? • Do you know your credit score? • Are you taking steps to improve your credit score? • Have you recently analyzed your debts to determine if you can reduce your loan interest rates by refinancing?

RISK MANAGEMENT • Are you maintaining adequate levels of insurance such as automobile insurance, health insurance, homeowners insur- ance, personal umbrella liability insurance, disability income insurance, life insurance, and long-term care insurance? • Have you recently compared the insurance policies you own to similar alternative policies to ensure that the policies you own represent the best value?

INVESTMENT PLANNING • Have you decided upon a prudent asset allocation target based upon your expected investment time horizon and tol- erance for risk? • Do you understand all of the investments that you own?

• Are you aware of all the fees and tax consequences associated with your investments?

TAX PLANNING • Are you fully utilizing all legal means available to minimize your taxes?

RETIREMENT PLANNING • Have you been contributing to a tax-deferred retirement plan such as an IRA, a Roth IRA, a SIMPLE IRA, a 401(k) plan, or a 403(b) plan? • Do you know how much you may be able to periodically withdraw from your accounts at retirement without having a substantial probability of running out of money before you pass away? • Do you know how much to expect each month during retire- ment from Social Security benefits and pensions?

ESTATE PLANNING • Do you have an estate plan that includes a properly drafted will, power of attorney, living will, and health care proxy? • Are the beneficiary designations of your retirement plans and life insurance policies correct and up-to-date?

“No” answers to any of the above questions should help to indicate areas of your financial plan that may need to be improved. Also, if you answered “no” to several of the questions, focusing on improving upon one area at a time should help to prevent the task from becoming overwhelming.

Michael B. Engdahl, JD, CFP® is an Assistant Professor of Financial Services at Edinboro University of Pennsylvania, a “fee-only” CERTIFIED FINANCIAL PLANNER™ practitioner, and an attorney with offices in Jamestown. He can be reached at (716) 485-6913 or

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