Before you know it 2014 will be here. So what better time to plan what you will do with your money in the new year than right now?
“The holidays are often a distraction for consumers, but many financial advisers are warning consumers not to overlook their finances as doing so before year’s end could cost you,” says Jeff Motske, president and CEO of Trilogy Financial Services. “The hustle and bustle of the holidays often distract people from making significant end-of-the-year financial decisions that they may come to regret.”
So what are some financial actions you should take in 2014?
Take a look at your portfolio, says Nick Ventura, president and CEO of Ventura Wealth Management. “The bond market depreciated the past year, and investors who held onto bonds or continued to invest in them suffered. Bond investment returns are minimal, at best, while stocks shot up to 25 percent,” he says. “So for 2014, be savvy about which classes funds rotate into: tech, transportation, industrial, healthcare, pharmaceuticals and small cap funds seem promising.”
But, says wealth manager Brian King at Plancorp, “Bonds are not for income. Due to low interest rates, bonds are not producing as much income as they have in the past. Bonds should be a part of your portfolio to provide security, not income. It’s not worth the risk to switch to lower quality bonds to produce more income.”
Ventura also adds that since the U.S. market did well in 2013, it might be time to look elsewhere. “The U.S. did well, and it’s rare for a market to continue into a second consecutive big year,” he points out. “Heading into 2014, investors should look internationally, perhaps to Europe, for growth.”
If you are worried about investing because of recent economic and political events, King advises that investors should stay the course and focus on the long-term plan, rather than worry about short-term noise and market movement.
Examine your tax situation. “Consider tax loss harvesting,” says Motske. “It’s a technique used to lower taxes while maintaining the expected risk and return profile in a portfolio. Talk to your financial advisor to see if this is a sound strategy for you.”
Speaking of taxes, King says take advantage of calmer year-end planning environment. And for the first time in years, we have a permanent tax law which makes planning for next year easier. “We actually know what the rules will be for 2014, making it easier to look ahead in our planning,” says King.
Get the best with your retirement plan. “The most important benefit is typically the company match to the retirement plan. Are you contributing enough to your plan to get all the ‘free money’ you’re due from the company match?” asks financial consultant Gregory Rogers of Cannon Beach Consultant.
Rogers also advises looking at your various accounts to make sure you are getting all the offered perks. “Are there discounts for insurance, cell phone service, or other purchases you’re not using currently? Check out the benefits website, or talk to your HR person/boss about it,” he adds.
Now is a great time to track your money. “Track your cash spending for a month. Look at how much you spend on certain items on your credit card every month. Once you figure out where some (or all) of your money is going, then you can start to do something about it,” suggests Rogers. And for 2014 set a financial goal, such as saving $100 more a month.
Elliott Orsillo, co-founder and portfolio manager of Season Investments, agrees. “Set a budget to understand how much money is coming in and where it is being spent. Then decide what is really important and where spending can be dialed back. The goal should be to try and save 10 percent-20 percent of one’s income,” he says Orsillo.
He also says to create an emergency account. “Build up a cash reserve in a savings account that will cover 3-6 months of expenses,” says Orsillo.