Your 2017 Financial Checklist

We’ve come to the last post of our fundamentals month. I hope this financial tune-up has helped clarify why you want to achieve the goals and resolutions you’ve set for 2017 and given you some tools to stick with them.

I want to end with a checklist of general topics and tools to keep in mind when focusing on your goals for this year. These essential elements should provide the foundation of your planning and ensure you’re covered in the proper areas.

The checklist includes five categories – fundamentals, insurance, estate planning, investing and taxes.  I’ve kept this checklist general for simplicity, but you can find additional information on specific categories in the related links.

1.     Fundamentals

Fundamentals tell you two essential things: how much money you’re earning and spending (cash flow), and how much you have (net worth).

  • Cash Flow – You can easily track what’s coming in and what’s going out through spending trackers like Mint and You Need a Budget.
  • Net Worth – You can also keep tabs on your financial health by monitoring your net worth (i.e., total assets minus total liabilities). Most spending trackers calculate your net worth for you, but you can also find separate tools like Personal Capital.


2.     Insurance

Once you know how much money you make and have, you need to determine the proper way to protect it. You can do this by having an insurance company share your risk of loss. Most people need five types of insurance:

  • Health Insurance: Most of us have health coverage through our employer. If not, you can find coverage through the Healthcare Exchange at You can also participate in a Health Savings Account (HSA) to save money on the cost of your medical expenses.
  • Homeowners/Renters Insurance: This type of insurance helps protect you from catastrophic fires, floods or earthquakes that may make your residence inhabitable and/or destroy your belongings. Homeowners especially need to protect their most valuable asset with this kind of insurance. Know the right type of policy with adequate liability and property limits. Don’t forget Renter’s Insurance is too important and too cheap to pass up.
  • Auto Insurance:  Most states require this insurance, although many people are underinsured without knowing it. Coverage includes liability, personal injury protection, collision, comprehensive, and uninsured or underinsured motorists. As with homeowner’s insurance, it’s essential that you have adequate property and liability coverage to protect your net worth.
  • Disability Insurance:  You have a greater chance of becoming disabled than dying.  Make sure you have insurance that covers you short-term and long-term if you become unable to work. You can also look into a retirement protection rider for additional coverage during the accumulation phase of your life.
  • Life Insurance:  Dealing with financial loss (especially the loss of a breadwinner) at the same time as personal loss can be devastating. If you have dependents, make sure you have this coverage.  20- or 30- year level term will cover the needs of the majority of people. If you think you may require a permanent policy, review and understand the fees associated with it.


3.     Estate Planning

In addition to protecting your assets, you need to determine what happens to them in the case of your death, disability, or incapacity.  Creating a will, trust and durable powers of attorney will help ensure your wishes are followed.

  • A Will: A will is a legal document that states how you want your property distributed upon your death. You can also use the document to appoint a guardian for your children and/or manager of their assets while they’re minors.
  • A Trust:  In its simplest form, a trust is a legal entity by which you (as trustor or settlor) gives another party (the trustee) the right to hold property for the benefit of a third party (the beneficiary). Not everyone will need a trust. You can learn the key distinctions here.
  • Durable Power of Attorney: A power of attorney gives a person (an agent) broad or limited authority on your behalf in the event of your incapacity.  You should have a durable power of attorney for health care and a power of attorney for finances.
  • Other Considerations: Update your current beneficiary designations on assets like a 401k, IRA, or Life Insurance. Also create a document where someone can find your passwords and log ins in case of your death.


4.      Investment Planning

Now it’s time to plan for the future. The fundamental principles for investing and retirement involve three key concepts:

  • Spread Your Risk: Invest across the whole market, thus reducing your risk as much as feasible.  You can diversify broadly and cost-effectively with index fund and/or ETF investing.
  • Keep Your Expenses Low:  Costs inside your portfolio matter…a lot. So keep them low. Say you have two mutual funds that start out with $100,000 and both give a 6% return. However, one fund has a yearly expense ratio of 1% (making the actual return 5%) and one has an expense ratio .25% (providing a return of 5.75%). Over a 30-year time horizon, the fund with the 1% expense ratio increases to $432,194, while the fund with the .25% expense ratio increases to $535,070. That’s a difference of over $100,000! That discrepancy grows with additional contributions.
  • Find the Proper Asset Allocation and Location: You need to make sure that your asset allocation matches your risk tolerance. This will prevent you from making any emotional decisions that can set you back significantly. You also need the right investments in the most beneficial account, whether tax deferred, tax-free or taxable.


5.     Income Tax Planning

Income tax underlies all other areas in your planning. Here are a few things that you can do to pay the least amount of tax as legally possible:

  • Review Your Last Three Returns:  Not only will reviewing the return help catch mistakes, you can learn a lot about your income tax situation by reviewing your return line-by-line and figuring out what specific aspects of our system apply to you. Comparing multiple returns can also show you how your situation has changed over the years and help anticipate some of the changes that are coming your way.
  • Get Organized Now: Along with reviewing your return for the types of deductions that you can take, you can also review it to learn what income documents you’ll have to gather for the following year.  Paying student loan interest? You’ll see you have a 1098-E.  Got some interest from a bank account? Look out for your 1099-INT.  You can create a checklist to quickly identify what you need. Once you get the documents, keep them all in one envelope or folder for easy access.
  • Adjust Your Withholding to Keep Your Money:  Use your prior returns to help keep more of your money in your pocket. Adjust your W-4 exemptions to keep as much money as makes sense based on what you owed previously. You can avoid the underpayment penalty if you owe under $1000 dollars.


As always, I would love to hear from you. Let me know what you think of the checklist and if something is on your list that isn’t on mine. Happy planning!