The first few weeks of the new year can be a good time for investors to make sure their financial house is in order and set themselves up to achieve their monetary goals.
To help clients position themselves for the year ahead, members of the American Institute of CPAs (AICPA) that have also earned financial planning credentials shared planning tips to help Americans improve their financial situation.
In June 2018, the AICPA announced that it launched a Personal Financial Planning (PFP) Certificates Program, offering CPAs another path to earning the Personal Financial Specialist (PFS) credential.
The AAICPA has more than 431,000 members in 137 countries and territories.
1. Start the new year with a new plan.
One of Lisa Featherngill’s favorite tips is to begin the year with a fresh plan.
“First you have to update your balance sheet, so you know your starting point. Then set goals — reduce debt or increase investments or something else — and attach a dollar amount,” Featherngill, a member of the AICPA PFP Executive Committee, suggested.
Then, a plan can be created to achieve those goals.
“It’s that simple, but you have to know where you are now in order to determine where you want to be,” Featherngill said.
2. Review 2018 spending in conjunction with 2019 budgeting.
Early January provides an ideal window for reviewing prior-year expenses and developing a reasonable budget for the current year, according to Michael Landsberg, a member of the AICPA PFP Executive Committee.
Landsberg suggested to strip out one-time nonrecurring expenses — such as emergency room visit or housing repairs — and then plot a course for 2019 spending that includes a buffer for future unforeseen expenses.
3. Review automatic payment subscriptions and renewals.
The start of the new year is a good time to review all the various automatic payments and subscriptions set up in the past, Brooke Salvini, a member of the AICPA PFP Executive Committee, said.
“Some expenses, such as entertainment streaming services, a gym membership or an old magazine subscription may no longer fit into your budget, lifestyle, or new year priorities,” Salvini said in a statement. “It’s easy for money to slip away by losing track of all the small payments scheduled through automatic payment methods.”
Salvini suggested making a review of these payments a part of one’s general New Year cleanup.
4. Update your Form W-4 for withholding.
As Julie Welch pointed out, “2018 saw major changes to individual taxes. The IRS substantially revised the withholding tables in early 2018.”
Now that 2019 has begun, Welch, a member of the AICPA PFP Executive Committee, suggested that individuals check their withholding to see if they need more or less withheld in 2019.
5. Make an early calculation of 2018 taxes.
The new tax bill has likely made significant changes to individuals’ tax opportunities, according to David Stolz, a member of the AICPA PFS Credential Committee.
“Don’t wait until April to understand what those opportunities are for you,” Stolz said. “You may need to adjust your withholding, change your charitable giving strategy, take advantage of new tax brackets or depreciation rules among many other strategies.”
6. Revisit workplace retirement plan contributions.