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Ep. 109: Goodbye 2020 – How to Financially Prepare for 2021 and Beyond
Who could have guessed this year would have gone the way it has when we were celebrating New Year’s Eve a year ago? The answer is no one, but we’ve made it through all the obstacles and challenges and a new year is on our doorstep.
As we look back on 2020, there’s so much that we can discuss but we thought it would be fitting to talk about the financial challenges that have faced CRNAs and what we can do to put ourselves in a more secure position moving forward.
When you think back through this year, there has been a lot of fear out there and rightfully so. A lot of that was related to the presidential election and the uncertainty of how each administration would impact us personally. Now we’re moving past that and hopefully stability will follow.
One of the benefits to 2020 has been that many of us have spent less because of the pandemic. With fewer things to do and limited places to go, we’ve become more conscious of our spending habits and learned that we might actually be comfortable living with a small budget.
For the first time in our careers, we’ve seen CRNAs not working for stretches of time in 2020. Who could have predicted that when the year began? That’s why we’re stressing the importance of making sure you have an emergency reserve fund in place. Many Americans had to dip into savings and exhausted a lot of what they had built up. By stashing away somewhere between 3-6 months in expenses, you’ll have the piece of mind to know you have some protection should we face another unexpected challenge.
The next aspect of your finances we’d suggest putting on your radar is your mortgage. Have you thought about refinancing? We saw a lot of people take advantage of the historically-low interest rates and save themselves significant money over the life of the loan. If you’re close to paying off your house it might not make as much sense, but it’s definitely something you want to look into.
What about about your credit? When is the last time you looked over your credit report? We’ve had first-hand experiences with credit mistakes over the past couple of years and that could really damage your financial reputation. On top of errors, there might also be a payment that you just completely forgot about from years ago that needs to be resolved. Being aware of your credit can save you money and headaches down the road.
Now let’s shift to the investment side of your financial portfolio. Hopefully you didn’t let the significant losses in March keep you from the gains that were made over the next nine months. No matter how your investments performed, use this as a chance to review your allocations to see if you need to rebalance. Then consider the realized gains and losses you might have in your portfolio to determine what adjustments might be needed to keep you from having too many tax obligations.
Speaking of taxes, this will be something to closely watch this year and future years because the general consensus is taxes will be going up at some point. So how can you keep from having a big tax bill down the road? One thing we discuss with clients quite a bit is utilizing a Roth account or look to do a Roth conversion. This means you’ll have more in taxes now but it can be a significant savings down the road depending on where rates go.
One of last significant item you need to get a grasp on now is your estate plan. This is so easy to put off and we see it happen all the time, but make it a priority to get this in order. Start with making sure you beneficiaries are updated on every account. This is an easy thing to do and it can save you and your family a lot of problems. Also make sure all of your accounts and passwords are saved somewhere that your spouse or significant other can access. Beyond that, get your will or trust set up and communicate with the necessary people so your intentions are known.
Along with these bigger items, some additional things you want to put on your list for 2021 include:
Are you maxing out your retirement contributions?
Where do you stand with any college funding that needs to be done?
Charitable giving and how it fits into tax planning.
How much will you spend in retirement?
Today's show schedule:
6:52 – How Sharon & Jeremy feel about the vaccine
9:49 – The financial topics we’re going to cover on this show
12:03 – Are you scared?
13:21 – People have spent less this year
14:58 – Make sure you have your emergency reserve fund
16:20 – Should you refinance your mortgage?
20:00 – Have you checked your credit recently?
26:21 – Investing considerations for 2021
29:20 – Where will taxes go in the future
31:52 – Retirement contributions
33:20 – College funding
34:20 – If you’re getting close to retirement
38:32 – Charitable giving
41:54 – Estate planning