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5 Habits You Should Start in the New Year

5 Habits Checklist

 

The New Year is underway, the holidays are behind us, and your financial situation is stabilizing now that you have paid all the bills.  Now it is time to begin to think about how you are going to help your financial future.  The New Year is always a good time to start new habits- realize I did not say “make resolutions”.  As a firm, we find that people who make resolutions typically end up retreating on them within 1 to 8 weeks of making them.  Habits, however, once started and continued will become a part of your daily life, and they tend to stick around for the long term.  Depending on the person, habits may take 21 to 60 days to become a part of your daily life.

There are five habits you should start today that will help you in reaching and attaining both your short term and long term goals.

1) Create a Budget

Take stock of how much income you have coming into your household each month and what expenses your income is paying each month.  You can do this by simply putting pen to paper or utilizing an online tool that will track this for you.  Each month, review the expenses and see if there are items that can be reduced or eliminated.  For instance, you may have forgotten about automatic monthly payments set up for services you no longer use.  This will put you in a position to review each expense and make sure it is a necessary one for your household.  In addition, you will have an excellent view of whether or not you are cash flow positive (having more income than expenses each month) or cash flow negative (having more expenses than income each month).

2) Start and Maintain an Emergency Fund

Years ago, our parents and grandparents frequently spoke about saving money for a rainy day.  The modern day term is an emergency fund.  Depending on your employment status, whether you are an employee or own your own business, and your level of comfort will dictate what size emergency fund you should maintain.  Each person is different, and we have recommended anywhere between a 6 month to 18 month emergency fund for clients.  This is money that should be kept in a separate account from the account by which you pay your monthly bills.  This account should be liquid, meaning you can use the money on a moment’s notice if needed.  A savings or money market account will work well for these monies.  You will want to determine what size your emergency fund should be and begin to accumulate funds until you reach that amount.  Once you reach the desired amount you should only use these monies for an emergency.  Things that may warrant you tapping into these funds may be the loss of a job or income, unexpected home or car repair, or simply any unexpected expense.  After the emergency is paid for, you will want to replenish this account at your earliest convenience.

3) Pay Yourself First

Ideally you want to pay yourself first each time you get paid, and then learn to live on the monies that are left.  There are a few ways to pay yourself first depending on your type of employment.  As an employee, you will want to take part in your company’s 401(k) or retirement plan.  A small business owner or independent contractor may want to consider setting up a retirement plan if they do not have one.  The last option would be for those that do not have, or cannot set up, a retirement plan and they would have to use either an IRA or brokerage account.  A good target would be to try and pay yourself 10% of your pre-tax earnings if you are deferring to a retirement account, which is preferred.  You may need to adjust this a bit if you are contributing after tax.

4) Review Beneficiary Designations Annually

We all face critical financial and life events that will impact us during the course of a given year.  You certainly would not want your assets to end up going to beneficiaries which you did not intend them to go.  Beneficiary designations should be reviewed at least annually, or if you experience a major life event or change.  Examples of times that you would want to review these designations would be: the birth of a child or grandchild, marriage, divorce, death, disability, or job change.  Whether you are digital or analog, place a reminder on your calendar to review this each year.

5) Rebalance Your Portfolio Annually

Rebalancing is something you will want to make sure you review at least annually; whether you manage your portfolio yourself or use an advisor.  Typically rebalancing has a tendency to get forgotten when markets are going up because people tend to get complacent and think there may be no risk in waiting.  Rebalancing will help you maintain your portfolio allocation and risk with its intended targets.  You may recall back in the late 1990’s, when technology investments were booming, the technology bust.  There were many investors that saw their portfolios assets allocation change from 10% allocation to technology stocks to 70% in a relatively short period of time.  In many cases this large allocation to technology was a huge overweight, meaning more money was allocated to that sector than you initially intended.  This was great while those securities were doing well, but what these investors did not realize was the risk they were imposing on their assets.  When the technology sector busted they had 70% of their portfolio at risk instead of the original 10%.  Had they rebalanced along the way, a good deal for this risk could have been avoided.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

2018 Happy New Year

New Year Photo Dream

 

Mitlin Financial Inc. would like to wish everyone that we work with a Healthy, Happy and Properous 2018! 

We hope that all of your dreams come true in the coming year.

Resolve to Get Your Financial House in Order

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The holidays and New Year are right around the corner. It is now the time to start thinking about what you can do to get your financial house in order for the coming year. The turn of the year is typically a time of reflection and planning to right areas that you may have let go astray in the previous year.

Implementing a financial plan is our top financial item you should resolve to address in the coming year. This vital item could have a tremendous impact on your financial future; not only for yourself in the coming year, but also for generations to come. 

The coming year should be used to design, develop, and implement a financial plan. Think about the amount of time that you spent last year in researching, booking, and mapping out your vacation. Was more time spent on planning your vacation or your financial future? I would argue that, in most cases, vacation won this battle. 

A financial plan is more than just a budget, reviewing your investment gains/losses, or even having a 180 page document that sits on a shelf or in a drawer. Your financial plan should be a living and breathing document. We have met with many clients over the years that have let us know they already have a financial plan, and we ask to review it with them. It is rare that we encounter someone with a plan that was completed recently and/or that they have actually looked at in the last few years. This is not a plan; this is merely a snapshot of their situation at a particular time.

The plan should reflect your current circumstances and address your future needs, wants, and wishes. At a minimum, the plan should review your retirement, education funding, estate planning, risk management, asset management, and emergency fund strategies. Ultimately, these are all fluid areas and simply taking a snapshot of where things stand today will not define your ability to get where you want to be in the future.  Some of the most important work that goes into a plan is the monitoring and updating of the plan over time.

In most cases, putting a plan together and reviewing your progress over time can consume a good deal of your time. We would recommend that you consider hiring a fiduciary advisor that can help you get started and monitor this process over time.

According to the CFP Board's Financial Planning Practice Standards, financial planning is a six step process as outlined here:

  1. Establishing and defining the client-planner relationship
  2. Gathering client data, including goals
  3. Analyzing and evaluating the client’s current financial status
  4. Developing and presenting recommendations and/or alternatives
  5. Implementing the recommendations
  6. Monitoring the recommendations

This process is a comprehensive overview of what a financial plan entails, and we cannot express enough the importance of step 6. You cannot develop a plan without monitoring and adjusting it as needed over time.

Mitlin Financial, Inc. believes this should not wait another year, and that you should start on your path to building your financial future. Be sure to contact us regarding your own situation and set up an appointment to see if we are a fit for you. Give us a call at (844) 4-MITLIN x12 and allow Mitlin Financial, Inc. to facilitate your financial future!

Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

5 Tax Planning Steps to Take Before the Year Ends

As we enter the final quarter of 2017 (yes the last three months of the year are here), I am sure you feel the same way we do and cannot believe how fast this year has gone by. Keep in mind that the year is not going to slow down and there are several things you should be thinking about as the final days of the year pass us.

We are going to provide you with five things that you should review in the next couple of weeks to ensure that you are prepared for 2018 and filing your 2017 tax returns.

     1) Take caution before making investments in a non-qualified (or non-retirement) account(s). This time of year mutual funds begin to announce their plans to distribute capital gains to their shareholders. The last thing you want to do is make a significant investment in a mutual fund and then get hit with large capital gains after only owning the fund for a few weeks. Does this mean you should or should not invest in these types of accounts until January 1st? No, you can certainly invest between now and the end of the year, but you must be aware of the potential consequences. In addition, there are strategies that you can use to invest your funds now and avoid these capital gains distributions before the end of the year.

      2) Review your non-qualified account mentioned above. Take note of your year-to-date capital gains or losses due to sales of investments over the course of the year. You may want to sell some of the investments that are not performing well in your portfolio (take the loss) to offset gains you currently have in your account year-to-date. Another option may be to take some gains in your account if you have a net loss for the year thus far. This type of review will allow you to put yourself in a better tax position for the year.

      3) Do you have carryover losses from previous years on your tax return? You may want to take some profits in some of your holdings if you have carryover losses reported on your return. The IRS only allows you to take a loss of $3,000 after you net out your gains and losses, so utilizing this strategy will allow you to capture a gain without tax liability to the extent you have a carryover loss.

     4) Take a look at your retirement plan(s) and see if you are on course to maximize the benefits of the plan(s). Although you can make IRA, Roth IRA, SEP IRA contributions in 2018 for 2017, your 401(k) contributions (in most cases) need to be contributed in the 2017 calendar year. You should review the extent to which you have contributed this year vs. the maximum contribution allowed ($18,000 if you are under 50 years old, and $24,000 if you are over 50). You may want to increase this contribution towards the maximum if you are going to be in need of a tax deduction.

      5) Stay alert.....Tax reform is being spoken about on almost a daily basis at this point. There have been debates as to whether this reform will go through in 2017, retroactive back to January 1, 2017, or will we see it passed in 2018. It is important to stay alert because we do not know what tax reform will look like or what it will mean to you because it is so fluid at the moment. You will want to know what it means for you when (or if) it is passed. Pay attention because this may have an impact on your tax obligation for 2017.

Mitlin Financial, Inc. believes that working with a team is an important part of getting the best outcomes for our clients. It is important that the strategies above are reviewed and evaluated for your own personal facts and circumstances. Being that we do not provide tax advice, we welcome the opportunity to work with your CPA to review your situation and make sure that you are doing everything you should be in order to be prepared for your 2017 tax filing and mitigating the tax impact from your investments as well. Be sure to contact us regarding your own situation as we enter the end of the year. Feel free to give us a call at (844) 4-MITLIN x12 and allow Mitlin Financial, Inc. to facilitate your financial future!

Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

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