October on the North Shore brings cooler temperatures, changing leaves and, of course, Salem’s famous Halloween festivities.
While October is known for its haunted attractions and spooky surprises, some of the scariest surprises aren’t found in a haunted house. Sometimes, they’re hiding in your finances.
Unlike a Halloween scare that quickly fades, financial planning mistakes can quietly follow us for years, often without us realizing it until the consequences become costly.
The good news? Most financial mistakes are preventable. With thoughtful planning and regular reviews, you can identify potential problems before they become financial frights.
The ghost of the ‘Set it and forget it’ plan
One of the biggest financial planning mistakes is assuming once you have a plan, you no longer need to think about it.
Your financial plan should evolve as your life does. A new job, marriage, children, inheritance, business opportunity or change in your goals can all affect your financial strategy. Even without a major life event, your investments, taxes and retirement goals may warrant a periodic review.
Your financial plan should be a living strategy, evolving as your life, priorities and financial circumstances change.
The phantom of procrastination
“I’ll get to it eventually” can be a frightening phrase when it comes to financial planning.
Waiting to increase retirement savings, establish an estate plan, review insurance coverage or address tax strategies can make future decisions more difficult. While it is never too late to start planning, time can be one of your greatest financial advantages. What may seem like a small step today can have a lasting impact on your financial future.
The curse of ignoring taxes
Taxes are often treated as an afterthought, but they can have a significant impact on your overall financial picture. Investment decisions, retirement account withdrawals, charitable giving, estate planning and the timing of income can all have tax implications.
I recently met with a client who, before working with a financial advisor, had sold a significant amount of stock without fully considering the tax consequences. While the sale itself may have made sense, the client hadn’t accounted for the capital gains taxes that would follow. When tax season arrived, they were faced with a substantial and unexpected tax bill.
Unfortunately, situations like this are not uncommon. With proactive planning, there may have been opportunities to manage the timing of the sale, spread gains across multiple tax years or explore other strategies to help minimize the tax impact.
The ghost of outdated estate planning
An estate plan created years ago may no longer reflect your wishes.
Beneficiary designations, wills, powers of attorney and other estate planning documents should be reviewed periodically and after major life events. Failing to update them can create unintended consequences for the people and causes that matter most to you.
Your estate plan should reflect your life as it is today, not the life you had when the documents were first created. As your family, finances and priorities change, your estate plan may need to change with them. Taking time to review these documents periodically can help ensure your wishes are clearly reflected and your loved ones are prepared for the future.
Key takeaways:
As we approach the end of the year, consider adding these four items to your financial checklist:
1. Revisit your financial plan. Make sure your strategy reflects your current goals, priorities and circumstances.
2. Stop putting off important decisions. Identify at least one financial task you’ve been avoiding and commit to addressing it before year-end.
3. Consider the tax implications. Before making significant investment or financial decisions, understand how they may affect your tax situation.
4. Review your estate plan. Confirm your documents and beneficiary designations still reflect your wishes.
Take a fresh look at your financial plan, identify the areas that may need attention and make sure your strategy still reflects where you want to go.
Emily Promise, CEO and financial advisor at ShorePoint Advisory Group (formerly Blakely Financial), is a Marblehead native and the financial columnist for the Current.
