Tips for New Year Financial Planning

The new year is a time of both reflections and resolutions. It's a chance to evaluate your life and think about what you hope to accomplish in 2019. If you haven't settled on a resolution, or you want to take on another one, there are a few smart financial moves you should think about.

It can be hard to stick to resolutions, which is why it's important to set clear goals and strategize for success. Whether you're hoping to buy a house in 2019 or just want to make the most of your income, here are 10 easy ways to make 2019 the best year yet for your wallet.

Get Started with the Basics

• check Pull Your Credit Reports:  Even if you don't plan on making any major purchases, you should keep an eye on your credit. Annual Credit Report offers free credit reports from all three credit bureaus, Experian, Equifax, and TransUnion. You get one free report from each bureau every year.This important step will let you know if you have any major credit issues. If your report shows unfamiliar accounts, it could mean your identity was stolen. You may also find missed payments that you actually paid. Either way, you'll want to catch and correct any problems as soon as possible.If you think you've been targeted by identity thieves, you'll want to either close or freeze any affected bank or credit card accounts. You may also want to freeze your credit, which means that no one (including you) will be able to open up any new accounts without providing the password you set up. Next, you should document the fraud by filing a report with the Federal Trade Commission and with the credit card bureau (they must report the same information to the other two bureaus, so you shouldn't have to do this three times). You may also want to alert your local police department. These reports create a paper trail, which may help you dispute fraudulent charges.
• check Ask Experts About the New Tax Law:  A sweeping overhaul of the U.S. tax code took effect this year, and taxpayers will feel the changes for the first time while filing their 2018 taxes. Your taxes will likely be affected no matter which tax bracket you're in. Take time to figure out how your taxes will change so that your tax situation won't be a surprise in April.This is especially important if you live in a high-tax state, pay property taxes, or make mortgage payments. The new tax law doubled the standard deduction, and many people who used to itemize may now find that it's better to take the standard deduction. Check with a tax expert so you can be sure you're making the best move.
• check Check Your Insurance Coverage:  Use the new year as an opportunity to re-evaluate your insurance plans. Take a look at your car, health, and home insurance plans, and make sure the coverage is both affordable and adequate. When you're adding it all up, don't forget about the additional charges that get tacked on to insurance services, like co-pays and deductibles.

 Financial Planning Advanced Tips

• check Use Technology to Your Advantage:  The most powerful financial planning tool is right in your pocket. Apps like Betterment and Wealthfront can be downloaded straight to your phone, allowing you to access financial advice, investment options, and retirement accounts without getting off the couch.There are also apps like Acorns and Wealthsimple, which focus on making investing as easy as possible. Just answer a few basic questions about your financial goals, and the apps will create a personalized investment plan. Link a credit or debit card to these robo-investors, and the apps will round up every purchase to the nearest dollar. Those nickels and dimes add up, and they're automatically invested according to your plan.
• check Keep it Traditional with a Personal Consultation:  Financial planning apps are convenient, and they keep your costs down, but there are benefits to meeting with a financial advisor in person. If you have a question while using a financial app, you'll have to scour the "Contact Us" page to find the right number to call. Meeting with an advisor in person gives you the opportunity to ask those questions as soon as they pop into your head.Advisors also have a holistic sense of financial health, as opposed to apps that focus solely on investing. Financial planners are an invaluable asset for people with big financial goals and not much expertise, but the higher level of service will cost more than financial apps.ment
• check Automate Your Bills:  Stop telling yourself you'll set up auto-pay for your bills this year and actually do it! Once it's set up, you'll never accidentally miss a payment (which helps your credit score). It also saves you time every month, which you can use to put more thought into your financial goals.Many companies offer paperless billing, and when that's coupled with auto-pay, your bills will become as waste-free as they are hassle-free.

Consider Before Recasting

Remember, once you put funds into paying down your mortgage, you won't be able to access those funds unless you qualify for a cash-out refinance, or sell your home. If you have other high-interest rate debt, such as student loans, or carry high balances on credit cards, the extra funds will be put to better use paying those balances off first.

Also, remember that the equity in real estate carries a zero rate of return. No matter how much equity you have in your home, the value is determined by the market for homes in your area and the condition of your home compared to those homes. Whether you have 20% equity or 40% equity - the value of your home will not be impacted.

If you don't have substantial savings and investments already, and you suddenly inherited some money, receive a bonus, or a stock distribution, for example - use the excess funds to establish or feed some investment that does earn a return of some type. Investing in different assets will create more chances for your overall wealth to grow, rather than betting all on the value of your home increasing.

Choosing to Recast

If, however, you plan on staying in your home and paying down a lump sum on your mortgage makes sense in your situation, you can look forward to these benefits:

• Lower monthly payment
• Same interest rate
• Small fee
• Retain current level of property taxes
• Improved cash flow

Recasting can be used as a tool for financial planning, too. If you're purchasing a new home and your existing home has not yet sold than you're likely going to get a larger mortgage on the new house than you'd planned. Buying the new home first might help you get a lower price on the home and secure a lower interest rate. When the old house does close, the proceeds from that sale can be used to reduce the new mortgage.

Knowing how recasting works, and when it can be useful, can help you decide if it's right for you. It may be something you explore with your loan officer at the time you get a new mortgage. If the opportunity comes up virtually out of the blue, sit down with your financial advisor to review your best use of the excess funds before proceeding with the mortgage pay down and recast.