9 Actions to Avoid During a Financial Reset
There are certain milestones in life that may require you to completely revamp the way you handle your finances: getting married or divorced, having a baby, starting or ending a business venture, or gaining an inheritance, to name a few. Wealth Advisor Alison Young suggests nine actions to consider when planning a financial reset.
Don’t overextend in the hopes of a future payout. If Clark Griswold taught us anything, it’s the importance of making sure your bonus hits your bank account before building a swimming pool. No one wants to be stuck with bills they can’t pay and a jelly-of-the month subscription they can’t monetize. Wait until the bonus comes in, the commission check clears, or the extra money lands before you participate in discretionary spending.
Don’t forget about tomorrow. Paying down debt, saving for retirement, and budgeting for holiday presents isn’t the most ‘fun’ way to use excess dollars, but it will provide the most benefit in the long run. Reward yourself with something small, and use the rest for long-term purposes.
Don’t compare your situation to others. Retail stores receive millions of dollars a year in returns from social media influencers who purchase an item, snap a photo, and return it — to pretend their budget and lifestyle is something it’s not. Focus on your goals and dreams; forget what everyone else is doing. You don’t know what their bank account really looks like.
Don’t embellish. No one loves to pay taxes, but it is a requirement. Make sure your tax return is an accurate representation of your financial picture. Appearing to keep up with the Joneses might be cute on social media, but it’s in your best interest to be honest with Uncle Sam.
That said, don’t do it all yourself. Hire qualified tax preparers to help you navigate ever-changing tax laws, and to help you find meaningful deductions. The dollars saved by doing it yourself are often lost by not taking all the exemptions to which you’re entitled.
Don’t set it and forget it. Schedule a yearly review of your financial plan as well as your trust and estate documents. This way, you’ll always know where you stand and whether you need to make any adjustments.
Don’t over-react. The market has been volatile lately, and headline-grabbing news has been constant. Remember that long-term planning matters, and that changes to your portfolio should be based in fact, not emotion.
Don’t forget to diversify. No one area of the market always wins. Diversify to match your investment portfolio with your time horizon, risk tolerance, and financial goals/needs.
Finally, don’t forget to give. If you’re blessed with excess, consider helping those who are not as fortunate. Not only are charitable donations usually considered tax write-offs, but giving back will also leave you with that warm, fuzzy feeling inside knowing you’re helping others.
Alison Young is an executive director and wealth advisor with J.P. Morgan Wealth Management. She has more than a decade of financial services experience and 20 years in business. Alison provides holistic wealth management services for high net worth individuals, families, business owners and entrepreneurs.
