2020-11-21 13:08:01 –
Hmm. Now that 2020 is finally over, as if COVID-19 hasn’t created enough pain, we must unravel the economic turmoil that has occurred this year. It’s still possible to revise the course, but it’s time to consider the big picture of our finances.
For some, and perhaps for most, this year has varied from difficult to catastrophic. If that’s you, financial reviews may seem meaningless given the dire outlook you may be facing. It must not be different from the truth. Understanding financial data is more important than ever, no matter how difficult the exercises are.
On the other hand, reviews are just as important if you’re financially upholding or if you’re prosperous by paying off your debt this year. We want to build on our success while planning the potential for a change in our destiny next year.
This exercise is also important because a solid understanding of the numbers will help you better assess your options when it comes to making career and job hunting decisions.
Below are six key areas (and other categories) to consider by the end of the year.
1. Income tax. You will almost certainly file a tax return, but this year it may not look like anything else. For example, the recently increased standard deduction may seem like a logical course, but it’s worth seeing if the cost of working from home changes the equation.
Other tax considerations may include unemployment benefits (taxed as income) and CARES law grants that you may have received as an employer or gig worker. This is still an opaque area, so it is advisable to postpone submission once you have prepared the material in case the rules change after the New Year.
2. Health insurance. This is an important period for you if you are unfamiliar with the market after losing your employer’s coverage. Any insurance you start after a furlough (COBRA, spouse compensation, Medicare, or ACA insurance) may be renewed.
This period. Consider using a broker or other advisor to organize your options and plan for next year. Now is the time to consider contributing to your health savings account.
3. Retired. Is your original retirement date still going well? OK, don’t laugh. If there was no first date, or if the timetable was swept away by the wind, this might seem like an ironic exercise. Anyway, do it just for practice. Review your contributions so far, determine if anything could come in, run the scenario, and see what the damage was to your original plan for the year. This data will help you make other decisions.
4. Debt. For some, the end of the year also means the end of student and mortgage grace. This is likely to be painful, so take the time to check your tolerance conditions now. If you have any extensions or other workarounds you can do, we recommend that you get started.
This is also a good opportunity to check your remaining debt in case something could be integrated or repaid with other assets.
5. Housing. As the largest asset / liability / expense in most family ledgers, housing should actually be reviewed annually. Issues to investigate include relocation, downsizing, refinancing, subleasing or renting unused space, and anything else that can reduce some of the cash flow burden on a home.
6. Work. If you are unemployed, and especially if your unemployment income is nearing the end, it may be time to pick up some intermediate work that seems feasible in the current situation. Don’t forget to negotiate in the unlikely event that your wages or salary rise. If you are currently working, consider talking to your manager to discuss salary increases and other additional compensation.
7. Other. The last few items of the year-end financial review: If possible, conclude the charitable donation. Check the rates for all insurance policies. Consider replacing your car to take advantage of favorable pricing.
And I hate ending up with solemn notes, but don’t forget to buy life insurance if someone depends on your income. With the pandemic still booming, more relief may come at the cost of policy.
Financial planning goes beyond the big picture. We’ll be back next week to see the cash flows and decisions you can make now to grow your valuable resources over the next few months, whether you have a job or not.
Financial Survival, part 1 – Big picture planning during a pandemic – Twin Cities Source link Financial Survival, part 1 – Big picture planning during a pandemic – Twin Cities