Tax deadline a good time for a financial tune-up

Face it, there are far more interesting things to do than review financial statements, employer benefit reports, or insurance coverage.

“With kids, family obligations, and 200 TV and cable channels all competing for our attention, it is hard to be proactive about finances,” says Mark LaSpisa, certified financial planner with Vermillion Financial in South Barrington, Illinois. Yet, settling for the alternative — being reactive — has its price.  Like finding out too late that a retirement plan is under-funded, a mortgage has been unduly costly, or that years’ worth of insurance premiums were buying insufficient coverage for a claim.

“While most people just want to get their taxes done and filed, tax time is actually an ideal time for an annual review,” says Bob Meighan, certified public accountant and vice president, with TurboTax in San Diego. “All the papers and files are already out, and it is the one time each year when the focus is on finances.” 

Fortunately with the proliferation of online resources, calculators and software, performing an annual tune-up is far less time-consuming than it used to be. 

What specifically do experts feel should be reviewed annually?

The family financial statement
“Comparing this year’s to last year’s provides a quick answer to the question: Am I headed in the right direction?” says LaSpisa.

Banks and brokerage firms, like Bank of America, actually allow clients to aggregate account balance information from various sources online and onto one screen, completely automating the process.  Offline, software programs like Quicken and Microsoft Money can be used to track annual net worth (calculated by subtracting total liabilities from total assets).

Expenses

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Quicken and Money also make tracking spending by category as easy as a couple of clicks as do some online banking providers. Wells Fargo, for instance, through its My Spending Report option, makes categorizing spending automatic for its clients, allowing them to see exactly where their money goes during the year.

LaSpisa suggests spouses review expenditures — past and planned — together to eliminate surprises and the potential for spending at cross-purposes.  Where children are concerned, he also recommends an annual review of allowances to ensure they are realistic for each child’s age.

Retirement calculations
While hiring a professional would result in more thorough analysis of whether retirement savings is on target, online calculators such as those found at ChooseToSave.org can help make quick assessments.  They also allow users to make projections over a variety of ‘what if’ scenarios.

Social Security statements
LaSpisa suggests reviewing the annual benefits statement the Social Security Administration  mails out each year since errors or omissions are the responsibility of each taxpayer.  With so many companies merging and disappearing, attempting to straighten out an erroneous withholding entry 20 years after the fact could be rather impossible and harmful to a taxpayer’s final benefit calculation.

Asset allocations
Though reviewing investments and how they are invested should be ongoing, with most investors’ savings concentrated in their employer-sponsored 401(k) plans, it is easy to forget to regularly review and update allocation selections for current market conditions. Also, because limits on contributions keep rising, Meighan advises verifying that current levels reflect the maximum allowable — something that will pay off in the coming tax year. 

Reviewing beneficiary designations on all investment and savings accounts along with wills is also advised. “Laws change, relationships change, health changes — documents that were completed years earlier may no longer reflect current wishes or financial reality,” warns LaSpisa.

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