Final 2004 resolutions: Get personal financials in order

Here’s a quick personal-finance quiz: How much will you owe in taxes for the coming year?

Are your investment allocations in balance? Are you saving all you could for retirement? Are your homeowner’s and life insurance policies up to date?

If you don’t know the answers, now is the perfect time to stop and take stock.

Why now — when you’d rather spend some time on the ski slopes? Because the sooner you take action and get your 2004 plan set, the greater your potential tax savings and investment gains could be. Are you always scrambling to find ways to cut your tax bill? And in April, are you rooting around for receipts or hurrying to make the deadline for an IRA contribution?

Did you vow: Never again? Start now by making – and keeping – these six financial New Year’s resolutions, and you can declare independence from last-minute financial madness.

1. Records: Pull out that shoebox of receipts and get your records up to date. It should only take a few hours, and you have the luxury of spreading the task over several days instead of during one sleepless April weekend.

2. Taxes: Make your appointment with your tax adviser now.

The mad rush for 2003 tax preparation will start in just a few weeks so set a meeting now to ensure you and your adviser have time to review your entire tax picture. While there may not be a lot you can do to impact your 2003 taxes, planning early for 2004 will allow you and your adviser to examine your income and expenses and develop strategies to help you become more tax-efficient in the coming year.

Some questions you and your tax adviser can consider: Are you on track to receive a sizeable refund in 2003? If so, you may want to reduce the amount withheld from your paycheck and invest that money in 2004. Does it look like you’ll have a big tax bill? You can make the bite easier to swallow if you plan for 2004 taxes now by setting up a savings account, increasing the amount withheld or identifying additional deductible expenses.

3. Insurance: When’s the last time you checked your homeowner’s insurance policy? Did it automatically increase with the value of your home? Does it cover remodeling projects, costly new furniture purchases and other value-adding improvements?

Does your life insurance coverage reflect increases in your or your partner’s income? Are there new additions to your family? Are your employer health and life insurance policies up to date? Can you reduce costs by moving your auto, life and homeowner’s insurance to a single company?

4. Retirement accounts: Ask any financial adviser: “When is the right time to invest for my retirement?” and invariably, the answer will be: “Now.” For example, if you plan to invest in an IRA, don’t wait until the April 15 deadline. By investing the funds as early in the year as possible to reap the benefits of additional months of compounding. If you need to readjust as the year goes on, you can do it – yet you can’t make up for lost time by waiting.

Some other New Year’s considerations: Does your employer match employee contributions to a retirement fund? If so, that’s free money – and it’s in your interest to contribute at least the percentage to qualify for a full match.

5. Investments: Trying to “time the market” – jumping in and out based on the direction you predict the market will move – almost never is effective, yet you should periodically review your investments. Talk with your financial adviser about the allocation of stocks and bonds in your portfolio and make necessary adjustments.

6. Wills and other records: While you’re in this update mode, take a moment to review your will and trusts. Do they reflect changes in your family and finances? Does your spouse, partner or other responsible relative know where your important documents are stored in case you become incapacitated? It’s never pleasant to think about these questions, yet it’s important to include the answer in your first-of-the-year checkup.

A final note: Successful financial planning requires a team approach, and if you are an active participant, your team will be able to do a better job.

Now isn’t that worth a few hours away from the TV or the slopes?

Patrick Mercardante is regional sales manager and market area manager, at Wells Fargo Private Client Services in Northern Colorado including Boulder. Wells Fargo Private Client Services provides individuals with private banking, retail brokerage, investment management, trust and estate services.

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