This spring, I am prepping to grow hops to provide shade for my western exposed patio. It is a lot of work to create the structure, prepare the soil and get ready to watch them climb! As I do this, I can’t help but feel that the same is true with our monetary lives.
Spring is an important financial season and April is an opportunity to connect, create awareness, and to propagate the financial tools, techniques and temperaments to best serve you.
Even as you embrace your fall physical season, your financial world should continue to blossom. You may want to cultivate new conversations about your version of prosperity. You may want to grow your financial resources to impact the world around you. Pick one focus area this spring – it may be your charitable giving strategies, your investment decisions, your tax management tactics, your communication intentions or your spending habits.
–To illustrate the blooming process, I’ll take the example of someone who wants to get reconnected with and be intentional with her investments.
Step #1: Process with a Purpose
The blooming process begins with the question of why.
Start with a firm understanding of why it is important to grow financially this spring. Some examples include:
- You want to understand how to sustain the income needed during your distribution season of life.
- You want to manage your expectations for returns based on your current allocations.
- You want to position your assets to address legacy goals for your family or charitable organizations.
- You want to confirm you are invested in companies that reflect your values.
Your “why” will be unique to you, and there may be several of them. These are your motivators to press into the opportunity for growth.
Step #2: Understand Where You Are
This may seem like an obvious question, but you’d be surprised at how many places you have money that perhaps you didn’t realize. You may be a real estate investor, or you may hold stocks, bonds, or alternative assets such as hedge funds or private equity.
The question of the vehicles is also worthy of review. Your investments may be held within tax-deferred accounts, such as employer sponsored plans. Or if they’re held in brokerage accounts, it’s a good time to review if you are paying taxes annually on the income or gains. You may even have investments in life insurance or annuities that are more complex, or offer less liquidity but also warrant your attention.
Your spring cleaning can include dusting off those statements – open them up. Look at how they are titled. Reflect back on your “why” to keep you moving forward.
Step #3: How Do You Want to Use Them?
Which asset is best positioned to provide for your liquidity needs – when you need to get your hands on cash fast?
For your lifestyle needs, you may want to consider using fixed income resources (Social Security and pensions) for fixed expenses and look at variable income from your portfolio (that will reflect your market allocation) for expenses that can be adjusted. If the market is up, you can shave off gains and take that trip you have planned! If the market pulled back a bit, make the needed adjustments for a period of time.
How do you manage longevity concerns? Bond ladders or income annuities may be the investments you want to use that alongside social security and pensions help you to create income that you can’t outlive.
For legacy planning, qualified plans are good to leave to charitable organizations and non-qualified investments or real estate receive a step up in cost basis when they are inherited.
Step #4: Evaluate Who is Involved.
Chances are you already have some family members or trusted colleagues that you’ve brought into the conversation. Use this as an opportunity to reflect upon if there are any others you have left out or would add value to your process.
Also, ask yourself about your level of satisfaction with your professional team. This can mean anyone from accountants to estate attorneys to your financial advisor. The distribution season is markedly different than the accumulation season.
Step #5: Take Action!
This is where your feet hit the ground to step into your potential!
Combine accounts if appropriate. Reposition or rebalance investment allocations if needed. Change beneficiary designations where warranted. Harvest any gain or loss if the market environment is ripe.
Like a flower pushing its way through hard packed soil, this work is not easy, but your family and others will benefit!