A new year is upon us, and that means new years resolutions. Most of us make the ubiquitous promise to ourselves to visit the gym regularly, but invariably end up quitting after a couple weeks. This is also the time of year to reassess your financial situation and to make a resolution that you will keep to prepare your finances for 2012 and beyond.
“The new year should be about looking forward and starting fresh. A complete financial review can help you to get focused and back on track,” said Karen Barrett, chief executive at Unbiased.co.uk.
“Look at your mortgage, look at your pension; are you being tax efficient; where can you consolidate your debts or find a better savings rate? What is your financial plan for 2012?”
- Annuities
As of now pension annuity rates are at an all time low. Individuals about to draw income from pensions should consider all the many options available to them such as: drawdown, phased retirement, temporary annuities, investment-backed annuities and the open market option.
- Don’t be a “rate tart” with credit cards
Some well-intentioned people take cash out from their credit cards and put it into an interest bearing account. Most of the time the account’s interest doesn’t make up for the credit card interest accruing on the money withdrawn. Steer clear of any plans like this.
- Time for a financial clear out?
Check any debits that are coming out of your bank accounts each month. Are they benefitting the supplier more than you? If so, cut the fat from your budget and use that money to pay down existing debt.
- Risk tolerance for 2012
The upcoming year is looking to be another difficult fiscal year. It may be time to look toward minimizing losses rather than measuring gains. A solid strategy comes down to diversification and managing risks.
- Investment portfolio diversification
Having a diverse portfolio lessens the chance of catastrophic risk and loss if a specific few investments do very poorly. The best bet is to make sure your investments are well spread out.
- Reducing debt
Reducing total debt is very important to a strong financial plan. From a financial standpoint it is better to pay off existing debt, like credit cards, than putting that money into savings. This is because the low interest you earn in those accounts pale in comparison to the amount of interest you accumulate on the debt. For example, a 3% interest savings account compared to a 20% interest credit card.
- Life expectancy and protection
Healthcare later in life can be very expensive and part of a financial plan should consider potential life expectancy and if you think you will need the funds to pay for a nursing home or in-home care. Also, thinking about insurance to cover you in case an accident or illness prevents you from working. Having critical illness coverage if the unthinkable should happen could be a life saver.
- Protection of assets
A proper financial plan extends past even your own life. It is important to plan where and how your money will be dispersed after your death, especially if you are leaving behind significant funds. A miscalculated plan can lead to hefty unnecessary taxes on the money you leave behind.
- Take action
The final piece of the puzzle sounds the simplest but can be daunting. It is simply to stop procrastinating and take care of all of these questions as soon as possible. Speak to a professional and put their advice into action and start enjoying the rewards.
General Disclosures
This information is provided for informational/educational purposes only. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based on any information provided herein. Past performance is no guarantee of future results.
Third Party Information
While Total Wealth Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, timeliness, or completeness of third party information presented herein. Any third party trademarks appearing herein are the property of their respective owners. At certain places on this website, live ‘links’ to other Internet addresses can be accessed. Total Wealth Management does not endorse, approve, certify, or control the content of such websites, and does not guarantee or assume responsibility for the accuracy or completeness of information located on such websites. Any links to other sites are not intended as referrals or endorsements, but are merely provided for convenience and informational purposes. Use of any information obtained from such addresses is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness.
Read the original article here