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News & Insights

 

It's That Time Again: New Year's Resolutions

 

I like this time of year. While I’m not a fan of the start of winter in Michigan, I do enjoy celebrating Thanksgiving and Christmas. Plus, it gives me some time to reflect on the year that was and think about ways I can make 2024 better.

 The past three years have been unique, to say the least. 2023 felt much better as the COVID pandemic turned into an endemic, the phase where we learn to live with this virus and resume normal living. I’m hopeful that 2024 will continue to put COVID in the rear-view mirror.

 Like most years, I make my New Year’s resolutions during December, jotting down thoughts as I go through the holidays with the idea that I’ll pick two or three to work on, the more realistic the better. Here are some ideas from my checklist that you might put on yours as you think about your New Year’s resolutions, both in your life and of the financial variety.

 Develop a healthy habit…or do less of one you don’t think is healthy. It isn’t surprising that one of the most common resolutions is to lose weight/exercise more. Medical science is contributing with weight loss drugs, but a healthy diet and regular exercise is best. Quitting smoking and developing a consistent sleep schedule are other popular choices. On my list is reducing my time on screens, as I get plenty of that at work and studies have shown that engaging screens before bedtime disrupts normal sleep patterns.

 Spend more time with friends and family. According to Statista Research Department, the pandemic knocked the number of global flights from a record 38.9 million in 2019 to 16.9 million in 2020. 2023 is expected to finish at 34.4 million. The companies we follow in the travel industry are predicting continued recovery and possibly even a new yearly record in 2024. I believe the pandemic taught us that time spent with those we love is valuable, and I have a couple of trips next year already planned.

Assess your asset allocation. For well over a decade, interest rates were so low that most investors held stocks and eschewed bonds. Wall Street even coined the acronym TINA, There Is No Alternative (to stocks). However, with inflation falling and a 10-year treasury yield of around 4% there is now a positive inflation-adjusted return on bonds. While no one can predict the future, it seems unrealistic to believe that interest rates will fall back to levels experienced during the TINA era. If you believe you are too heavy in stocks, we would be more than happy to discuss asset allocation options with you.

 Make or update your estate plan. No one likes to think about terrible outcomes, but as they say, the only certain things in life are death and taxes. I know many of you have estate plans already, but for younger clients this is often not the case. Further, the simple passage of time changes our life circumstances, requiring an update to existing plans. If your estate is complicated enough to require an attorney, we do have some contacts we can suggest or at least point you in the right direction.

 Help us help you carry out your estate plan. On a related topic, I’m saddened when loved ones implementing an estate plan learn the financial steps needed to fulfill it were incomplete. We fully understand the need for privacy, but if you share information about your plan, including any trusts you have set up, it makes the pro­cess of distributing assets far easier. This can also help us avoid two of the most common issues we run into with estates: outdated beneficiary designa­tions and unfunded trusts.

 Learn a new skill or hobby. I find life is much sweeter when I’m learning, and I’m lucky that I picked a career where continuous learning is part of the job description. However, as I see my own retirement in the future (not now, but someday!), I know I will miss the continual learning and am thinking about what alternatives might fill this need.

 Examine your insurance coverage. As with your estate plan, the passage of time changes insurance needs. For example, every young family with children should have some life insurance on wage earners to replace income needs should the unfortunate happen. However, I often see older clients paying hefty premiums on life insurance they no longer need because they have accumulated sufficient wealth and their children have left the nest. On the other hand, clients with significant wealth might want to think about a relatively inexpensive umbrella policy that can pay off if an unthinkable accident or lawsuit happens.

 Make your 401(k) work to build your long-term wealth. For most of us our primary retirement savings will be through our 401(k) plan at work. I’m saddened when I see younger workers investing in conservative “aged based” mutual funds that utilize bonds as part of their asset allocation mix. For an account that penalizes withdrawals and will be invested for decades there is no reason to favor lower yielding bonds over stocks. Provident, through its service provider Pontera, can manage 401(k) assets appropriately on your behalf.

 Get Organized. Even the best organized among us can find some aspect of their life that could use some additional attention. I’ve found the key to accomplishing this resolution is not to pick a project that’s too big. For example, if you haven’t updated your wardrobe in a while and your clothes have become outdated, it’s time to purge.

 Do some tax planning. The Trump tax cuts are set to expire at the end of 2025. Not only will tax rates likely go up but the estate tax thresholds will be cut by roughly half. You might have some opportunities to save on taxes through Roth conversions, Donor Advised Funds, Health Savings Accounts, and other tax-advantaged plans.

 Increase the security of your information. It’s common to hear about a cyber-attack or data breach impacting our personal information. There is no way to protect yourself against everything, but you can take some sensible steps to make it harder for bad actors to snoop on you. A good place to start is locking down your credit information, which I’ve found has the added benefit of significantly reducing the junk mail promotions for new credit I get at home.  

Volunteer. Helping your community or working with others to fulfill a passion is very rewarding, particularly for those transitioning from the workplace to retirement.

 Review monthly expenditures. I am old enough to remember the inflation of the 1970s and, unfortunately, I see parallels to the bout of inflation we have experienced in the past two years. If you haven’t done it in a while, it’s a good time to review what you spend every month, prioritize, and economize on those items lower on your list. 

Live gratefully. Whenever I encounter set­backs, I try to think about the good things in life. This can be hard to do when we are constantly bombarded with news about the world’s problems. I don’t always accomplish it, but when I wake up every morning, I think of one good thing that I’m grateful for as I start the day. 

As always, we at Provident stand ready to help you with your financial needs, regardless of whatever New Year’s resolutions you adopt. We wish all of you and your family a very Happy New Year.

Dan Boyle, CFA