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The gifts have been opened, the leftovers are gone, the holiday decorations are packed away, the company has gone home and it’s time to think about resolutions for the New Year. We envision losing weight, exercising more, spending more time with family and other things we know we should do, like getting better organized. (See related story below.)

Who among us has not procrastinated taking a financial inventory and updating our financial plan although there are few things more important for our peace and mental health in the long term? William B. Howard, Jr., a Certified Financial Planner, has ranked many times in the past decade as one of the top 150 financial advisors in the U.S. for physicians by Medical Economics and agrees that the first of the year is a great time to focus on one’s financial situation. It’s not too late for a primer on beginning that process, coupled with fresh hope for the coming year and the future.

According to Howard, an excellent way to begin is to think about the foundation, how to build it and how to keep it solid and productive for our financial independence. Building new habits by keeping our plan current is one of the best ways to take action and not just spend time thinking about it.

“Financial planning is a lifelong process,” Howard emphasized. “Make an appointment with yourself and review your financial health.” Assess where you are in meeting your goals and objectives. Don’t have any? Time to write them down.

Think about what you want to accomplish both in the short-term and the long-term. You can even jot them in your smart phone as you are waiting in the grocery line. The biggest challenge is procrastination – it is the number one enemy for financial success, according to Howard. When thinking about goals and objectives, consider the following topics: insurance, investments, college funding, retirement and estate planning.

These are the first steps to take, according to Howard:

• Define your goals and objectives – without this basic step, you don’t know where you are going.
• Collect statements on all of your bank accounts, investment accounts, retirement plans, liabilities, and insurance policies to build your current financial position.
• Evaluate your progress in light of meeting the stated goals and objectives.
• Look at alternatives if your progress isn’t satisfactory and change your course.
• Implement the plan of action to get you on track to meet your goals.

Questions to ask yourself that will tell you if you’re headed in the right direction: Do I have adequate insurance in place to protect my family in the event of my death or disability? Do my investments reflect my comfort level? What is the return on my portfolio? Check that you have the right allocation of investments for your goals and comfort level.

Most families have accumulation goals; for example, a college account (529 plan, money grows tax-free and comes out tax-free) or retirement plans (401k, profit sharing plans). Do you know if you are saving enough to fund college expenses? Are you maximizing your contributions toward your financial independence (retirement)? Your financial advisor can develop a retirement capital projection to determine whether you are on track for reaching your desired level of retirement income in light of market and inflation factors.

Howard said another part of the financial plan is to look at overall estate planning. “This is where most of the procrastination occurs.” Remember that estate planning “… is a statement of your character and love for your family because it’s not for you, it’s for them.” He added, “There is nothing worse than dealing with the emotional trauma of grief compounded with disorganization and document loss. This adds even more stress which can be paralyzing.”

Update your will or if you don’t have one, the state of Tennessee will provide one for you. If you don’t have one, add this as your top priority on your 2011 “to-do” list. It is usually best to consult with an attorney to draft your will and prepare powers of attorney for healthcare and financial matters. Don’t let the cost of going to an attorney deter you from this worthwhile investment.
Howard recommends meeting the first quarter of the year and quarterly throughout the year with your financial advisor. Look at all the components of the tax laws that affect you, both personally and in your business. “No one financial plan fits everybody,” Howard stated, “but the basics remain similar for everyone.”

One of the biggest struggles is getting clients to look at their cash flow (or to use that dreaded word – budget), according to Howard. “It’s a great stress releaser to know that one is living within one’s means and that you know where your money is going. An annual fiscal check-up can work wonders if you are consistent in scheduling it every year. Once you are organized, decisions come easier when changes need to be made because you have a grasp on where you are and do not have to recreate your financial position,” Howard said.

Howard’s firm includes a paragraph in their clients’ financial plan called the “911 Section” to be consulted when one’s identity is stolen or there is a death. It is good to let loved ones know where the lockbox is, where the key is, the inventory of what’s in the box and written instructions on what to do.

“It’s a good idea to look at insurance and estate planning documents about once every three years unless there is a change in one’s situation that requires a revision or if tax law changes affect the estate,” suggested Howard. The frequency of the regular assessment also depends on the size of the estate. “There are dips in the economy and you want your portfolio investments to be able to weather these from an optimal position,” he said.

You also want to look at your liabilities. These are historic times for low interest mortgages and it may be wise to refinance. Be careful – the cost of refinancing may outweigh the benefits of a lower rate especially if you don’t have many years left on your mortgage. Howard also advised, “Pay off your high interest cards.”

Howard summed up how to get the most out of your annual check-up:

• Write down your goals and objectives. What are your accumulation objectives? College funds? A second home? Financial independence?
• Look at your cash flow/create a budget
• Renew your investment portfolio/consider your risk management
• Review your beneficiaries on insurance and investment accounts, bank accounts, etc.
• Update your estate plan documents, including power of attorney for health/finances
• Look at mortgage rate on residence/refinance if beneficial
• Assess your insurance needs/planning – car, home, residence, disability, liability umbrella, malpractice
• Don’t try to time the stock market/invest for the long term
“Volatility and inflation risks are the two major risks we strive to protect our clients from,” said Howard adding, “Once the time frame is defined for accomplishing what one needs to accomplish, the investment instrument, its term and how it is allocated can all be determined and implemented, whether it is a short or long term goal.”




Related Story

Top 10 Physician Money Mistakes

Procrastination. Physicians lead demanding lifestyles that often do not provide much time to devote to other aspects of their lives. However, procrastination could affect your financial health for years to come.

Not establishing a budget. Even if you earn a healthy salary and your cash flow is not restricted, a budget is helpful to contain excess spending. This is a great method to help you identify your sources of income and expenses.

Not anticipating inflation. Low inflation has been a fixture for the last couple of years but, rest assured, it will occur again. Inflation decreases the amount of purchasing power over time. $1000 today would have the same purchasing power as approximately $377 in 20 years with a constant 5 percent inflation rate. To combat inflation, allocate your investments toward a growth style of management.

Failure to properly diversify your investment portfolio. Depending on your current situation, your portfolio should hold a range of securities in different asset classes. Diversification is the only sure way to minimize risk by maintaining an appropriate investment mix of stocks, bonds, and money market. A diversified portfolio may not bring you extraordinary investment returns, but typically it will weather the bad times better than a non-diversified portfolio.

Failing to plan. Not establishing and implementing a plan of financial action can jeopardize your retirement goals. Your plan should state simply what you have, what you want and how you are going to get there. Once you develop your plan, you should prepare yourself to make adjustments accordingly when necessary.

Unrealistic expectations. Many people expect dramatic results too fast. Overzealous expectations often stem from a perfect world mentality. There is nothing wrong with setting high goals but you should be aware that life doesn’t always turn out as we wish, and disappointment is a reality. Don’t let failure destroy your dreams. Use it as a learning tool for success.

Lack of insufficient insurance coverage. No one can predict when the need for insurance protection will arise, so we must hedge against such events. The following forms of insurance are needed to protect you and your family from unforeseen catastrophic events: life, health, disability, malpractice, home and auto.

Inadequate estate planning. The creation of wills and trusts are used as tools to facilitate your wealth in the latter stages of life. Don’t let the government decide who receives your assets when you die. Keep accurate records and update your estate plan often.

Not keeping your spouse involved in your financial matters. Keep your spouse fully informed. If something happens to you, would your spouse know where your important documents are?

Not consulting a financial advisor. Expert advice is crucial when making any important decision. You wouldn’t want your patient seeking anyone other than a professional for advice, so see an advisor for guidance on your important financial issues.

Source: William Howard & Company, Financial Advisors, Inc.

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Inc. Financial planning Estate plan Physicians financial planning Money mist, Jr. William Howard & Co. Financial Advisors, William B. Howard

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