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Wealth Column: Organizing your finances this quarter

Break up elements of your financial life — budgeting, investments, asset protection, tax planning, retirement, estate planning, charitable giving, and so forth — into monthly tasks.

Bruce Helmer and Peg Webb sit next to each other at a table.
Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings.
Contributed

Everyone was probably relieved to turn the page on 2022.

We’ve had a year in which almost every asset class lost ground. Inflation spiked and the war in Ukraine showed very little signs of resolution. That said, you can control only what you can control. By remaining disciplined and sticking to a well-constructed financial plan, you should be able to handle whatever life throws at you. It's helpful to bring order to all the various elements of your financial life — budgeting, investments, asset protection, tax planning, retirement, estate planning, charitable giving, and so forth — by breaking them down into monthly tasks. Here’s a calendar to help you manage the next three months.

January: Financial Wellness Month

The U.S. Consumer Financial Protection Bureau defines financial wellness as “a condition wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”

There are near-term and longer-term aspects to wellness. In the near-term, it’s a good idea to include specific and achievable financial goals in your New Year’s resolutions. These may include increasing your financial literacy, paying off those holiday bills, tracking and reducing your spending, and setting up or fortifying an emergency fund.

Word cloud of investment, retirement terms
Contributed / Metro Newspaper Service

Newly expanded contribution limits for qualified retirement plans let you sock away more in your IRA, 401(k) or 403(b) plan. You should contribute at least enough to qualify for an employer-matching contribution if your plan offers it.

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To improve your longer-term financial health, you should create a Net Worth Statement — essentially, one sheet of paper that takes all of the assets you own (e.g., your house, stocks, bonds, cash, personal possessions) and subtracts from that number everything you owe (e.g., outstanding mortgages, lines of credits, car or college loans, and so forth). Household net worth is a very useful financial planning tool.

Also, take advantage of an annual free service to check your credit report or score (visit AnnualCreditReport.com or call 1-877-322-8228 to request your report).

Toward the end of the month, prepare for tax season by creating a physical or digital file folder to hold all the bits and pieces you’ll need for filing your federal and state tax returns: your W-2, 1099s, financial statements (bank and brokerage accounts), etc. Getting organized now will save you time and lots of headaches come Tax Day, which this year falls on April 18 in Minnesota.

Finally, especially after the volatile market we had last year, don’t forget to review your investment portfolio to make sure it hasn’t strayed too far from your target asset allocation.

February: Plan the Valentine They’ll Always Remember

Circle Valentine’s Day to remind yourself to make sure the ones you love are financially protected should the unexpected happen. Review your estate plan to make sure it’s up to date. Starting this year, individuals can transfer up to $12.92 million to heirs, during their lifetimes or at death, without triggering a federal estate-tax bill, up from $12.06 million last year. (Married spouses can each make the same lifetime gift.)

Thanks to inflation and the IRS, there’s also a higher annual limit on tax-free gifts in 2023, rising to $17,000 from $16,000. Rules get complicated, so be sure to check with a tax professional or financial adviser before making any big moves.

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Pick one or two financial wellness goals and work on them at your pace. Soon you’ll develop confidence in your ability to achieve the financial success you’ve always wanted.
Planning for taxes across these horizons gives you peace of mind by providing for yourself and your family no matter where taxes are headed in the future.
Having a Health Savings Account or Flexible Spending Arrangement can be help if you or family members are saddled with high or unexpected health care costs not covered by regular insurance.

Be sure to verify the beneficiary designations on your life insurance policies and IRAs to ensure your assets will go where you intend them to go. Beneficiary designations supersede the directives in your will. We know lots of situations when divorced couples changed their wills but forgot to change their beneficiary designations! The money went to the exes.

Beware the Ides of March

March 12 is when we switch to Daylight Saving Time, and it’s time to focus attention on asset protection. Fire safety experts recommend using this day each year to replace the batteries in your smoke detectors. Be sure to test your carbon monoxide monitor, too. While you’re at it, take a minute to review your auto and home insurance policies to make sure you’re not over- or under-protected.

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Monday, March 20, is the first day of spring, and lots of folks we know start their spring cleaning around this time. Whether you’ve already filed your taxes or are going through your shoebox of receipts, you will see why reducing paper clutter and signing up for online bill pay and digital statements can reduce lots of stress during tax season.

taxes.jpg
Toward the end of January, prepare for tax season by creating a physical or digital file folder to hold all the bits and pieces you’ll need for filing your federal and state tax returns<br/>
Contributed / Metro Newspaper Service

Scan any important financial and tax documents covering the last seven years, and store files on a secure hard drive. This includes confirmations that contain the purchase date and cost basis of any investment held in a taxable account. (You’ll need to know this information if and when you decide to sell for the purposes of calculating your short or long-term capital gains.)

Another useful tip is to title your scanned documents so they can be found on your computer. Try grouping documents by year, and then in sub-folders that categorize each file by their purpose and priority level. Buy a shredder or retain a service to shred tax returns and bank statements that are older than seven years or that are no longer necessary. If you prefer or need to store paper records, make sure they are somewhere safe but easy for you or others you designate to access.

If you have investment accounts at different custodians, think about moving your investment dollars into a single account that you can keep a closer eye on. Close bank accounts and credit cards that you no longer need to keep your finances organized and easy to maneuver.

This will make life easier for you now, but also for your executors or personal representatives you name to manage your affairs after you’re gone (While we’re on this gloomy topic, make sure your executor or family members know where you store your login passwords for all financial accounts.)

Taking these steps today, and working with a qualified financial adviser, can help position you for financial success down the road. We wish you and your family a healthy, happy and prosperous New Year.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on News Radio 830 WCCO on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL.

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