Financial Newsletter 7.23 - Armstrong Advisory Group

Halfway Home

With June in the books, we are at a fantastic time for you to undertake a mid-year review of your financial plan. During a mid-year financial plan review, it is important to assess your household’s financial health and make any necessary adjustments to stay on track.

Firstly, evaluate your current budget and track your expenses over the past six months. Look for any areas where you have exceeded your budget or where you can cut back. This will help you identify potential savings opportunities and make necessary adjustments to your spending habits. Additionally, assess the progress of your savings goals and emergency fund. Have you been able to consistently contribute to your savings? Is your emergency fund sufficient to cover unexpected expenses? Reviewing these aspects will allow you to determine if you need to increase your savings or adjust your financial priorities.

Next, review your outstanding debts, such as credit cards, loans, or mortgages. Examine the interest rates, repayment terms, and overall debt load. Identify opportunities to pay off high-interest debts faster or consolidate debts to simplify your financial obligations. Consider developing a debt repayment plan to expedite your journey toward financial freedom. Simultaneously, evaluate the performance of your investments, such as stocks, bonds, or mutual funds. Compare the returns against your expectations and the market trends. Consider rebalancing your portfolio if needed, based on your risk tolerance and investment goals. Consulting with a financial advisor can help ensure your investments align with your long-term objectives.

Moving forward, review your insurance policies, including health, life, auto, and home insurance. Assess whether your coverage is adequate for your current circumstances and if any adjustments are necessary. Analyze premiums, deductibles, and coverage limits to ensure you are getting the best value for your insurance needs. Similarly, examine your retirement savings and assess whether you are on track to meet your retirement goals. Consider increasing your contributions to retirement accounts if possible, taking advantage of any employer matching programs. Review your investment choices within retirement accounts to ensure they align with your desired retirement timeline and risk tolerance.

Another crucial aspect to consider is tax planning. Review your tax situation and evaluate any potential tax-saving strategies. Consult with a tax professional to identify any available deductions, credits, or other tax benefits you may be eligible for. Consider adjusting your withholding or estimated tax payments to avoid any surprises when tax season arrives. Furthermore, if you have children, review your education savings plans, such as 529 plans or education savings accounts. Assess the progress you have made toward funding their education and consider adjusting your contributions if necessary. Research scholarship opportunities or other forms of financial aid that can help ease the burden of future education expenses.

Don’t forget to assess the status of your estate planning documents, such as wills, trusts, and powers of attorney. Review the beneficiaries listed on your accounts and update them if needed. Consult with an estate planning attorney to ensure your wishes are reflected in your estate plan and to address any changes in your family or financial situation. Lastly, take the time to revisit your overall financial goals and objectives. Are they still relevant and realistic? Do you need to adjust or refine them based on any changes in your personal or financial circumstances? By reassessing your goals, you can align your financial plan with your aspirations and make any necessary adjustments to keep moving forward.

In conclusion, a mid-year financial plan review provides an opportunity to course-correct and ensure that you are on track to achieve your financial objectives. Building financial plans is one of the things we do at Armstrong Advisory Group, so if you’re looking for someone to help guide you through this process, click here to schedule a time to speak with a member of our team.

Raise the Roof

When you receive a raise, it’s important to evaluate your options and make informed decisions about how to best utilize those funds. Every household has a different financial situation, and it’s important to focus on your goals, challenges, and dreams when deciding what to do with a newfound salary bump. Here are different ways to evaluate what to do with the extra money:

Assess your financial goals: Start by reviewing your financial goals and priorities. Do you have any short-term goals like paying off debt or saving for a vacation? Are there long-term goals such as saving for retirement or buying a house? Understanding your goals will help you allocate the extra money accordingly.
Create an emergency fund: Consider setting aside a portion of the raise to build or bolster your emergency fund. Having a dedicated savings account for unexpected expenses can provide a safety net and financial peace of mind. A strong emergency fund may help to provide you the foundation to take other financial risks because you know you have enough set aside to cover emergencies if they occur.
Pay off debt: If you have any outstanding debts, such as credit card balances or loans, using the extra money to pay them might help you improve your financial footing. Start with high-interest debts to save on interest payments in the long run.
Invest in retirement: Increasing your contributions to retirement accounts, such as a 401(k) or an individual retirement account (IRA), can help secure your financial future. Evaluate your retirement savings and consider allocating a portion of the raise towards these accounts.
Save for education: If you have children, grandchildren, or plan to pursue further education yourself, consider allocating the extra money towards a dedicated education savings account, such as a 529 plan. These funds can grow tax-free and be used for qualified educational expenses. There are some restrictions on what the proceeds can be used for, so make sure you understand the limitations of the tax-free nature of 529 plans and where they can and can’t be used to receive tax-free status.
Save for major purchases: If you have any significant purchases on the horizon, such as a home or a car, you can use the extra funds to contribute towards a down payment or save for a larger down payment to reduce future loan costs.
Invest in yourself: Consider using the extra money to invest in your own personal growth and development. This could include taking courses, attending workshops, or acquiring new skills that can enhance your professional abilities and potentially lead to career advancement.
Enjoyment and lifestyle improvements: We all want to be responsible with our money. But it’s not a bad thing to spend a portion of a raise on something fun. While you probably don’t want to spend all of your raise on something purely for your own enjoyment, taking a portion of it and using it for something that gives you some additional happiness is a great thing to do to improve your quality of life while still maintaining a responsible budget.

Remember, the key is to strike a balance between different financial priorities based on your unique circumstances and goals. It’s advisable to seek professional advice from financial planners or advisors who can provide personalized guidance tailored to your specific situation.

Buyer Beware

Evaluating whether or not to accept a pension buyout requires careful consideration of several factors. Here are some key steps and considerations to help you in your evaluation:

Understand the Offer: Review the details of the pension buyout offer provided by your employer or pension plan administrator. Take note of the lump sum amount being offered, any additional incentives, and the terms and conditions associated with the buyout.

Assess Your Financial Situation: Evaluate your current financial status and long-term financial goals. Consider your overall financial health, including your savings, investments, other sources of retirement income, and any outstanding debts or financial obligations.

Compare the Lump Sum to the Pension Benefits: Calculate the present value of your future pension benefits by considering factors such as life expectancy, inflation, and interest rates. Compare this value to the lump sum amount offered. You may need the assistance of a financial advisor or actuary to perform this calculation accurately.

Consider Your Risk Tolerance: Pensions offer a guaranteed income stream for life, while a lump sum introduces investment risk. Assess your risk tolerance and ability to manage investments. If you prefer a predictable income with limited investment risk, keeping the pension may be more suitable.

Evaluate Longevity and Health Factors: Consider your life expectancy and overall health. If you have a shorter life expectancy or significant health concerns, taking the lump sum may be more beneficial. However, if you have good health and anticipate a longer lifespan, the pension’s longevity protection might be advantageous.

Review Employer Stability: Assess the financial stability and reliability of your employer. If your employer is facing financial difficulties or bankruptcy, taking the lump sum might provide more security and control over your retirement assets.

Understand Tax Implications: Analyze the tax implications associated with both options. Lump sum payments are typically subject to income tax, while pension payments may have tax advantages. Consult a tax professional to understand the specific tax consequences in your situation.

Seek Professional Advice: Consider consulting with a financial advisor or retirement specialist who can provide personalized guidance based on your circumstances. They can help you analyze the offer, consider your financial goals, and make an informed decision.

Remember, the decision to accept a pension buyout is highly individual and depends on various personal and financial factors. Take your time, thoroughly evaluate the options, and seek professional advice to make an informed choice. Armstrong Advisory Group has experience discussing pension choices and how they may impact your financial future. To schedule a time to discuss your situation with a member of our team, click here.

Estate of Play

When reviewing your estate plan, it’s important to address several key items to ensure it reflects your current wishes and circumstances. Here are some important aspects to consider:

Will or Trust: Review your will or trust document to ensure it accurately reflects your intended distribution of assets, appointment of executors or trustees, and guardianship provisions for minor children if applicable.
Beneficiary Designations: Check the beneficiary designations on your life insurance policies, retirement accounts (e.g., IRAs, 401(k)s), and other accounts to ensure they align with your current wishes. Update them if necessary.
Assets and Debts: Review your list of assets and liabilities to ensure it is up to date. Consider any changes in your financial situation, such as acquiring new assets, selling assets, or paying off debts.
Executor or Trustee: Assess your choice of executor or trustee and evaluate whether they are still the most suitable individuals for the role. Confirm their willingness to serve and consider naming alternative choices if needed.
Power of Attorney: Review your power of attorney documents for financial and healthcare matters. Ensure they reflect your current preferences and that you trust the individuals appointed as your agents.
Advanced Healthcare Directives: Evaluate your living will and healthcare proxy or medical power of attorney. Make sure your instructions for medical treatment and end-of-life decisions align with your current values and wishes.
Minor Children: If you have minor children, review your plans for their care and well-being in case of your incapacity or death. Consider naming guardians and discuss your choices with the potential guardians to ensure their willingness and suitability.
Charitable Bequests: If you have charitable intentions, review any planned charitable bequests and ensure they are still in line with your philanthropic goals. Consider any changes in the organizations you wish to support.
Tax Considerations: Assess the potential tax implications of your estate plan. Consult with a qualified tax advisor or estate planning attorney to explore strategies that may minimize estate taxes or maximize tax benefits for your beneficiaries.
Family Dynamics: Consider any changes in your family dynamics, such as births, deaths, marriages, or divorces. Review how these changes may impact your estate plan, including the need for updated beneficiary designations or adjustments to bequests.
Legal and Financial Professionals: Evaluate the legal and financial professionals involved in creating and managing your estate plan. Ensure you have trusted advisors who can guide you through the review process and provide any necessary updates.
Regular Review: Establish a schedule for regular estate plan reviews. Life circumstances and laws change over time, so it’s essential to revisit your plan periodically to ensure its continued effectiveness and relevance.

Remember, estate planning can be complex, and it’s advisable to consult with an experienced estate planning attorney or other qualified professionals to assist you in reviewing and updating your plan.

Schedule Your Review

July is a great time to look at your overall financial plan. Our financial advisors are happy to meet with you to discuss your situation and how we may be able to assist you in crafting a financial plan that is right for your situation. Click here to schedule a time to speak with a member of our team about your planning.

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The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.

Armstrong Advisory Group, Inc. does not offer tax or legal advice and no portion of this communication should be interpreted as legal or accounting advice. You are strongly encouraged to seek advice from qualified tax and/or legal experts regarding any tax or legal matters relevant to you.

ARMSTRONG ADVISORY GROUP, INC. – SEC REGISTERED INVESTMENT ADVISER
The information contained herein, including any expression of opinion, has been obtained from or is based upon, sources believed to be reliable, but is not guaranteed as to accuracy or completeness. This is not intended to be an offer to buy, sell or hold or a solicitation of an offer to buy, hold or sell the securities, if any referred to herein.

All investments involve the risk of potential investment losses. An investor cannot invest directly in an index. Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantees against market loss or greater or more consistent returns. Bonds are subject to interest rate risk and if sold or redeemed prior to maturity, may be subject to additional gain or loss. Armstrong Advisory does not provide any tax or legal advice; please consult with your tax and legal advisers on such matters.