New Year Financial Checklist - 2023

As we look ahead in 2023, many of us are thinking about our financial goals for the months and years to come. Whether you're planning for retirement, considering a business sale, or simply trying to organize your financial life for yourself and your family, there are steps you can take to set yourself up for success. With that in mind, review our financial planning checklist for 2023:

1. Develop a Financial Professional Relationship; Focused on You

Finding the right financial advisor can be a complex process, but there are a few key considerations as you begin your search. First, focus your search on fiduciaries. Working with a fiduciary helps to ensure your financial team acts in your best interest.

Second, determine what type of team you need. There are many financial advisors, including financial planners, investment advisors, and wealth managers. At Buttonwood, we take a holistic approach, placing us in the Wealth Manager category. As your Family CFO, we focus deeper than the standard investment management approach. Instead of focusing primarily on investments, we manage and incorporate your investment strategy into your overall financial strategy while also implementing strategy across key areas of your financial life (tax, insurance, estate, cash flows, balance sheet, business, education, etc). It’s important to consider which level of service you and your family need by looking at your objectives. If your main goal is to invest assets, an investment/asset manager may be the best fit. If you are ready for a coordinated strategy across your financial life and focused on multigenerational wealth, a wealth manager may be the better fit.

2. Determine What to Do with “Extra” Money

Now is the perfect time to begin thinking about your spending for 2023 and beyond. When you find yourself bringing in more money than is going out, exciting opportunities begin to present themselves. From simple things like shifting from a traditional bank account to a cash management strategy, you may more than double or triple your rate of return. Beyond your paycheck, what other income streams are contributing to your monthly cash flows? Perhaps you have investments, real estate, a pension, or maybe it’s your consulting business bringing in the extra cash. Regardless, we strongly recommend tracking your income and comparing it to your expenses.

By doing a comparison, you will be able to determine the amount you can allocate to positively impact your financial life. For example, you may be able to contribute more to retirement accounts (providing additional income throughout your life), charity (reducing your tax bill today), a business (creating additional cash flows and assets), unique investments (targeting growth of assets), or to a future generations’ education (setting up the next generation for success). It’s important to work with your financial team to create and implement a plan to meet your goals while keeping your personal balance sheet strong.

3. Work to Reduce Your Tax Bill and Increase Retirement Income

Forward a summary of your employee benefits to your wealth manager and ask if there are opportunities you have not taken advantage of. Does your employer offer a 457 plan? What about an FSA or an HSA? Are there additional benefits available for your spouse? Will your 401(k) allow for an Employee After Tax contribution (in addition to Pre-Tax)? 

Based on the simple impactful concept of compound interest, the earlier you save, the more your financial nest egg will increase. Are you fully funding an IRA or Roth IRA in January? Did you know you can fund an IRA even if you have high income? Additionally, if you are over age 50, are you taking full advantage of catch-up contributions?

Part of our Family CFO Process includes development of comprehensive strategy based around your unique income, employee (or self-employed) benefits and your tax situation.

4. Review Your Estate Plan

When is the last time you updated your estate documents? This often falls by the wayside as life gets busy and other tasks take priority. However, you may be surprised how much can change in just a few years. As you gather information for your taxes such as reviewing each of your accounts, cash flows, and more, it’s a great time to review your estate plan.

The most common mistakes we see with estate documents is incorrect titling and beneficiary designations. Over the years, tax law changes have materially impacted how inheritance from retirement plans to beneficiaries are taxed. If you have assets in an IRA, 401(k) or similar, you should review your estate documents to address these changes. An integral piece of your estate plan is ensuring your assets are titled to the correct entity and beneficiaries are reviewed for impact after major events.

5. Review Your Risk

Are you taking on more risk than you are comfortable with? When markets are in a “risk off” mode as we saw in 2022, it’s important to proactively address changes in the economic cycle. When the major market indices are unstable due to later stages of the economic cycle, rebalance to protect assets and avoid major losses in a down market. See our Investment Policy Committee Updates for a deeper look into our strategy.

6. Protect Assets and Income

Insurance may be one of the ‘boring’ items that takes the back burner, especially if you haven’t had to make any recent claims. Regardless, it should be on your financial planning checklist. Our Family CFO Process includes a comprehensive review of your Life, Health, Disability, Long Term Care, Home, Auto, etc. policies. We often work with your current insurance providers to ensure you are covered in the event of an unexpected occurrence.

Life & Disability Insurance

Annually, look back on the previous year. Review your roles and responsibilities and how they have changed. If a new baby has joined your family, if you have added or adjusted your mortgage, if your kids have an eye on a more expensive college, you may want to increase your life and/or disability insurance to ensure your dependents are taken care of in the event of the unexpected. If your balance sheet has grown, or if debts and obligations have decreased, you may be able to decrease the amount of life and/or disability insurance you are carrying.

No one ever plans for an accident or illness, but disability insurance ensures you still have income in case you are unable to work for an extended period. While they are relatively inexpensive to insure, we regularly see younger generations ignore disability coverage because they never think it could happen to them. “More than one in four 20-year-olds will experience a disability for 90 days or more before they reach 67,” says Carol Harnett, President of the Council for Disability Awareness.

Keep in mind policies can and should be reviewed regularly. If a family member has medical issues, often employer benefits offer life insurance coverage without medical underwriting. Employer plan benefits can save families thousands of dollars and often go overlooked.

Home & Auto

It can be easy to forget about reviewing home & auto policies, but an annual check-in can save you in the long run. When reviewing auto policies, be sure you have sufficient coverage for all drivers, not only yourself. You may have a new driver on your policy, which may mean it’s time to increase your coverage. It’s also important to think about your driving habits and what the upcoming year entails. If you are planning a long road trip, now may be a good time to increase coverage!

Even if you haven’t made any major changes or improvements to your home, we still recommend regular review of your homeowner’s policy. If 2022 was unlucky for your home, you may have seen flooding, wind damage, hail damage or damage due to large amounts of snow and ice.

Not interested in dealing with the intricacies of each policy? Review the benefits of an umbrella policy. These are all events your insurance agent and Family CFO should know about sooner rather than later.

Long-Term Care

Generally, we’ve found the addition of long-term care (LTC) insurance should be based on a combination of your personal balance sheet and cash flow needs. Similar to life and disability, generally the more assets and cash flow you have, the lower the need for LTCi.

Financial Professional Team Working for You

While these steps combine to be a big project on your to-do list, this is what we do! This financial planning checklist only scratches the surface of the services we provide for our clients. At Buttonwood, we know as wealth builds, life doesn’t get simpler; it becomes more complex. Contact us today to learn more about how our services may specifically benefit you.