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New Year, New Resolutions

L Haelen 2016
Laurie Haelen, AIF®
Senior Vice President, Director of Wealth Solutions
[email protected]
(585) 419-0670 x41970

When it comes to New Year’s Resolutions, there seems to be two types of people: those who look forward to making (and sometimes breaking) them, and those who think the whole thing is probably a waste of time. Everyone knows that many popular resolutions are broken by the time Valentine’s Day comes around, just look at the gym in January versus February or March!

However, I would argue that financial resolutions should be seriously considered for everyone. Getting started on financial resolutions at any time, New Years or not, can help bring peace of mind to both working and retired people when tackled in a few easy steps.

Step #1 - Know where you stand by calculating your net worth

For many, this may not be a challenge as you may already be a spreadsheet wizard or use an aggregator (i.e., MINT or Personal Capital) to regularly look at your balance sheet. For those who are new to the process, I would start by listing your assets including: home, investment accounts, bank accounts, loans, credit card balances, cash value of life insurance policies, 401k/403b, automobiles, home furnishings, vacation home or rentals. By subtracting debt from your assets, you end up with your total net worth.

The resolutions you should make may become clearer by regularly completing this exercise, as you look closely at your assets and liabilities, patterns may emerge. If you have low interest savings accounts and high interest debt, for example, a pay off strategy could be a top priority. Or, if your savings are not where they need to be, is there a way to save more?

Step #2 - Rebalance your portfolio

Volatility always creates opportunities, as the winners of last year are often the losers of today. Rebalancing your portfolio to your target allocation (such as 60% stocks, 40% bonds) will enable you to buy low and sell high, a proven long-term strategy for success. An annual rebalancing is preferable to a more frequent one, as studies show that rebalancing too often can increase taxes or fees and inhibit performance.

Step #3 - Review your credit report

Identity theft is running rampant, so checking your credit report is more important than ever. You are entitled to three free credit reports per year, in addition, many banks offer credit reporting that is free, and daily. There are also paid services that can help reduce the risk of someone opening accounts in your name or getting ahold of passwords or other personal data.

If your credit score looks good and you can verify all the accounts as yours, then there is not much more to do than continue to monitor the data. If there are issues, however, take steps to improve your credit rating as it would adversely impact your ability to borrow by forcing you to get credit at a higher interest rate, or not be able to get it when you need it.

Step #4 - Review Insurance Coverage

Insurance is a critical part of risk management and yet is an often overlooked area of personal financial planning. At least annually, you should review all your coverage, including your Property and Casualty (homeowners, auto and umbrella), as well as your life insurance coverage.

Step #5 - Set your budget for the year

When setting the budget for the year, a good method is to first establish the minimum required for living expenses. If your spending often exceeds your income, you may need to cut back on some of the more enjoyable things, such as vacation, concerts, sporting events, etc.

Be sure to budget not just for spending, but also for saving to ensure you have a comfortable emergency fund, as well as longer term investments for retirement or legacy needs/ wants.

The New Year is an excellent time to take a close look at your overall financial picture and take the necessary steps to rechart your course, if there are improvements to be made. If not, the peace of mind from knowing you are fiscally sound can put you in a positive frame of mind as you enter another year. As always, our team at CNB Wealth Management is ready to help you with any of your financial needs, so give us a call, we would love to help.

This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.