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7 Ways to Do “Preventive Care” on Your Finances Thumbnail

7 Ways to Do “Preventive Care” on Your Finances

In the neighborhoods surrounding both of our Halpern Financial locations, there are a number of great places to have lunch within walking distance. There’s something for everyone, from burgers at the pub to a healthy buffet at the organic market. What you might not realize, though, is that your choice of a healthy or unhealthy meal can say a lot about your financial habits too.

A 2014 study out of Olin Business School showed that there is a correlation between your retirement savings and your health habits. Correlation is not causation, but it makes sense that the two go hand-in-hand. Your future health and your future financial security are both long-term goals that require small, disciplined actions over time, like comparison shopping to find the better bargain, or choosing the healthier restaurant for lunch. It’s easy to let these small, everyday decisions lapse because the immediate impact is so, so small—but over time, they add up to your physical and financial fitness, or lack thereof.

Here are a few things you can do when you’re financially well to keep yourself on the right track.

1. Define your goals. 

If you don’t know where you’re going, how will you get there? Physically writing down your goals makes you more likely to achieve them. Think about your future needs and wants, from concrete goals like a down payment for a vacation home to more subjective ones like feeling financially secure. Work backward from these goals to identify the steps it would take to achieve them, and how long would it take to accomplish each step. Don’t forget to reward yourself as you achieve these steps to stay on track.

2. Meet with us for a “well visit.”

Sometimes people consider seeing a financial advisor once there is already a significant problem. This is like waiting until you have a heart attack to start cutting down on red meat and cholesterol. It is a lot harder to make the changes you need to succeed in a crisis situation—and in some cases, the damage has already been done.

However, if you maintain open communication with your financial advisor during good times and bad, you will establish healthy habits that stem from a better understanding of your financial life. This goes beyond which securities you have in your portfolio. Your financial advisor can coach you to stay on track with your financial goals, or help you adjust the strategy if your situation changes—all the while keeping in mind cost effectiveness, tax efficiency, and a diversified approach.

3. Increase efficiency.

You may be perfectly happy paying bills through the mail. But the more you automate, the more you reduce the likelihood of human error, and the potential that a bill will fall through the cracks. So if you haven’t already set up automatic billpay, or automatic transfers between accounts for other reasons (for example, child support or alimony), seize the day to save yourself time and stress in the future. Likewise, automating your saving limits another human error, the temptation to spend! At Halpern Financial we can help you to set up these transactions in a way that makes sense for your situation.

4. Estate Planning. 

No one likes thinking about what will happen if they pass away or become physically or mentally incapacitated. But the time to plan for these eventualities is when you are well, not in a crisis situation. If you do not already have an estate plan, contact an attorney to start the process and coordinate with your financial advisor to make sure the estate plan works in tandem with the financial plan. Titling of accounts and beneficiaries need to be coordinated.

5. Risk Management Review.

Insuring yourself and your family against financial loss is another one of those aspects people don’t like to think about, but it is well worth it to take proactive steps when everything is fine. You may even save money on premiums if you buy life insurance while you are well and healthy. Many auto insurers also offer discounts to low-risk drivers. Make sure to have a reputable insurance agent evaluate your needs for life insurance, disability, long-term care, and liability insurance. As we discussed in a recent post, we can help you to make sure these policies fit in with the rest of your financial plan. (Please note that at Halpern Financial, we do not sell or solicit insurance, and we have no relationship with any insurer, bank, or broker. However, we can help coordinate with your insurance professional to make sure your insurance plans work in tandem with other elements of your overall financial plan.)

6. Fine-Tune Cash Management and Cash Reserves. 

There’s never a bad time to evaluate your money management habits--both from an everyday spending perspective and a longer-view perspective. It can be tedious to sift through accounts, but it is worth the time because you could discover extra money you could be saving or putting toward a particular goal! It is also crucial to have sufficient cash reserves (typically about 3-6 months of your core spending). Having liquid cash on hand for any emergency or opportunity avoids debt!  Plus you earn interest and do not pay interest – a core principle in wealth creation.

I encourage you to think about the big picture of money management, then drill down to the details of cash flow. Ideally, the small actions you take with daily spending are in line with your big-picture goals.

  • How much liquid cash do you have available across all your accounts? Is it too much (sacrificing growth by keeping too much in cash) or too little (risking your financial security if an expensive emergency occurred)?
  • How does the amount of your debts compare to the amount of your assets? What is your net worth?
  • Are you taking steps to build your net worth?
  • What is your attitude about your monthly cash flow: abundance or scarcity?
  • Do your habits need to change based on your financial reality?
  • Is your spending in line with your values?
  • Do you review your account statements regularly to check for fraudulent spending?
  • Are there ways to streamline your spending, like canceling subscriptions you don’t use, or negotiating lower costs for certain services?

7. Increase Savings.

If you are not yet putting at least 10% of your income toward your workplace retirement account, start there. If you are already doing that, keep adding to savings until you max out your retirement saving (tax-deferred accounts), and don’t forget to add to after-tax accounts as well.

Unfortunately, often people think they are doing all they can do by adding to their tax-deferred workplace retirement plan, whether it’s a 401(k), 403(b), Federal TSP, or another type of tax-deferred plan. But remember that tax-deferred savings means that you are deferring the taxes to a later date—they must be paid eventually when you make a withdrawal. So while tax-deferred growth is one crucial tool for growing your net worth, it is not the only tool. After-tax (also known as taxable) investment accounts are also a key part of the picture because the money you contribute has already had income taxes taken out, so the balance you see in your after-tax investment account really is all yours (less capital gains taxes).  I recommend that investors contribute to both types of accounts to benefit from each of the two approaches.

I hope these ideas give you some food for thought and inspire you to take at least one step in a financially healthy direction. Take the opportunity when times are good to “invest” in your future!


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