All Things Financial Planning Blog

10 Things to Do in 2012!


It’s time to get the checklist out again as we start a new year. You’re hearing this from a checklist fanatic. I’m always afraid that somewhere down the road I will drop the ball on something which is why I try to follow the logic of the book titled The Checklist Manifesto by Atul Gawande that was written to avoid simple mistakes in medicine. I’m putting together my version of the 2012 checklist for your finances, along with a little health and happiness thrown in because health and wealth habits are very similar. When it comes to New Year’s resolutions or checklists, I figure there are only 4 reasons things don’t get done:

  • They are really not important but they sound good on paper
  • You don’t know that you need to do them
  • You don’t have the time to do them (aka they are not a priority)
  • You don’t know how to do them (it feels too overwhelming)

I really wanted to title this blog The Big Things You Must Do in 2012. I had an epiphany as to how things actually get done. My epiphany was that big and important things often are put on the back burner because they are too overwhelming. Yet easy little things can be resolved when you do 1 piece at a time or even just a few minutes a day, especially by using a checklist. Just recently we’ve revamped the way that we correspond with our clients based on what we call their “to do lists”, which are all the things they know they have to do but they never seem to have the time to do it and often we can’t do it for them without more information. My mantra for 2012 and future years is to do the little things, not the big things! Our process is to be proactive with our clients about six times a year to try to get all those dangling participle items off the checklist. If we give someone five things to do they never get done but if we give them one thing, we have a better shot. It all comes down to the goals versus activities. Yet it is a series of smaller activities that get goals accomplished. So focus on the activities and try to adjust a few little things a day and they will ultimately add up to completed goals and a finished checklist if you don’t make the tasks overwhelming.

Now that you understand the little things are big things and that activities are just as important as goals, then let us move on with my top 10 list you will get done for 2012:

  1. What do you have? This is a way to figure out what you own and what you owe to determine where you are. Basically you just add up the worth of your home, cars, bank accounts, investment accounts, retirement plans and even your tangible assets. Those are things in your house like your furniture, your jewelry, your coin collection, or anything else that you feel has some material value if you decided to sell it. Then add up everything that you owe which includes your mortgage, student loans, credit cards and personal debt from relatives, friends and bookies. The result is you Net Worth.
  2. Do a budget check up. Of course that makes the assumption that you have one, which unfortunately most people don’t. If you want to take the time, watch this Budgeting Webinar. You’re trying to get some sense of how much money is coming in and how much is going out. The difference between the two should be your savings or you’re overspending and not living within your means. Of course you’re going to forget stuff, which is why you can use this budget form as a guide. Just remember that your financial life needs to start with a positive cash flow to be sure you are saving!
  3. An insurance review is a critical part of financial planning. The events that could cause dramatic changes in your financial position are usually if we become disabled, have our homes destroyed, have somebody sue us, have healthcare problems, and of course dying. One of my previous blogs talked about the biggest risks we face in life and about half of them can be resolved by insurance.
  4. When is the last time you did a will? I try to make sure that clients take a look at their estate planning documents every 5 years or more frequently if there are any major changes in their lives like divorce, deaths and healthcare issues. If you don’t have a will at all, then it’s time to get on the stick because they are really important things to have unless you want the court system and people you don’t even know to manage your affairs. If your life is a little more complicated then you might also want to have a durable power of attorney that allows others to take care of your affairs if you are incapacitated or out of the country, a healthcare proxy if you end up under life support and maybe even some trusts if you are single, have children with special needs or have a an estate that’s worth more than $1 million.
  5. Check your credit report. You can often find some crazy little things in there that you might want to clean up, especially if you are planning to get a loan sometime in the future. If you see your credit score under 600, then you probably have some work to do to clean things up. Your report is free at least once a year from all the three major agencies and there is absolutely no need to pay to get a look at your report.
  6. How risky is your money based on where it is right now and how much risk do you think you should be taking? Most of the traditional planners use some type of asset allocation to figure out how much risk you’re taking based on your mix of stocks, bonds, international stocks, real estate, commodities and anything else you may own. If you really don’t know what you’re doing, it’s probably time to ask for a free second opinion about your portfolio from a trusted advisor of someone you know. The benchmark is the volatility of the Standard & Poor’s 500 stock index, which has something called a beta, which is 1. That simply means if your beta is .5 after someone does the analysis, you have about half the volatility or risk of the S&P 500 stock index. If you’re taking more than that, it’s probably time to make some changes. If you absolutely can’t find someone to do this, then try Morningstar or check this link.
  7. Are you paying too much in taxes and what are you going to do about it? Most of us aren’t certified public accountants or have the knowledge and desire to figure out the 72,536 pages of the tax code (which started with 400 pages in 1913). Just like it’s hard to determine your risk, you probably do need a professional here. Again it’s time to sit down with your tax person if you have one. If not, find a friend or co-worker that has one and see if you can get a free consult. Some accountants may even do it as a courtesy to their current clients in hopes you may work with them as a paying client in the future.
  8. Check out refinancing as we have some of the lowest rates in history. I am not just talking about your home; you might want to consider your car, a personal loan or any other loan that sits out there where you’re paying more than 4-5% to borrow the money. When I did a recent analysis of my client’s mortgages I noticed that a very large percent of people have mortgages higher than 5%. Unfortunately real estate prices have dropped about 30% from their highs, so you still need to have equity in your house. Preferably you should have more than 20% equity so that you don’t have to buy private mortgage insurance or have to pay down the mortgage with your savings and investments. That reminds me about credit card debt. It may make sense to take money out of savings and investments if you have a high interest rate and you’re getting very little from your portfolio or savings accounts. The simple explanation is that if you are paying a 15% rate on credit cards, you’re not likely to get better than a 15% rate on your portfolio. So paying off the credit cards is the same as getting a 15% rate of return. When it comes to your mortgage refinancing, ask how long it would take to break even on the new mortgage and figure out if you plan on staying in the house that long. Getting a 1-2% better rate in today’s world can mean saving thousands over the life of a 30 year loan. Be sure to shop around and get competitive rates that include the closing costs and any points as well.
  9. Ask for a raise or think about a career change. One of the best ways to improve your financial life is to make more money! Unfortunately people are uncomfortable negotiating with their boss to get a raise. Even worse is that we’ve had record job losses over the last few years and that can really wipe out years of progress when you have to live on unemployment checks. Since the recession began, we have lost almost 9 million jobs and only 2.2 million new jobs have been created. So you need to be proactive in two ways: First you can go to your boss and give her/him a program that is a win-win where you do better for the company and get a raise for it as well. The second thing is to retrain for another job that gives you better opportunities. This too is uncomfortable and may even require money to take courses. Making a change is never easy, but jobs aren’t guaranteed any more. Your human capital and earning power are probably the best single investments you have in your financial life.
  10. Mend a relationship and get healthier! There is a theme in my blogs over the last few years of the direct link between wealth, and health and happiness in life. People should have balance, so maintaining discipline in these key areas is critical. Here again I urge you to make these small daily changes in life to meet your big goals for a happy, healthy and prosperous life. One of the best ways to be happier is to spend more time with the people that make you feel better and a reconciliation with someone you really care about may be the best resolution you accomplish in 2012.

Okay your top 10 is out, get to it and turn the little things into the new big thing this year.

Dave Caruso, CFP®
Certified Financial Planner™
Coastal Capital Group
Danvers, MA

Author: Dave Caruso, CFP®

Dave attributes his achievements in Financial Planning and Wealth Management to three core themes: experience, effective communication, and attention to the details necessary to manage money in a quickly changing world. Dave is in his third decade in the advisory business, having graduated with his BA in finance at UMASS Amherst in 1980 and subsequently earning his Certificate in Financial Planning. Through the years, Dave has steered hundreds of clients with hundreds of millions of dollars through two major crashes, five bear markets, three recessions, countless financial crises, and dozens of fads and trends in the investment world. Dave’s professional credo is “to educate and motivate people about money so they can achieve their dreams.” Under his guidance, clients are kept on track to accomplish the things that are important in their lives, such as educating children and grandchildren, retiring, and leaving a legacy to loved ones.

2 thoughts on “10 Things to Do in 2012!

  1. Really nice piece Dave. I think you are spot on in tackling the little things. Over time they will add up to big things, and some of the little things are on the road to the big thing anyway so the big thing becomes smaller and more manageable. Mend a relationship. Phew, that’s a biggy. Maybe start that process with a little thing, a simple cup of coffee with the person in a busy coffee shop. Nothing to confronting and no outcomes expected…

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