Business News & TipsAlan S. Moore / L’Observateur / April 28, 1999Too many people wait until they file their income-tax returns to evaluate the preceding year’s finances and plan for the next. You should really beginmuch sooner, though, perhaps before year-end. This will give you plenty oftime to analyze what you have accomplished and to plan for what you hope to accomplish. A checklist of questions might help. (1) What are your financial goals? Before you do anything with your money, you should decide how you want to spend it. You should itemizewhat you have presently, what you need for the year ahead, and what you hope to have 10, 20 or 30 years in the future.
Published 12:00 am Wednesday, April 28, 1999
(2) Over the past year, have you made progress toward achieving your goals? You should probably compare the performance of your investments to the goals you’ve established with regard to those investments for the year. The results of this analysis will help you decide whether or not youshould alter your investments.
(3) Are any changes about to occur that will affect either your immediate needs or your long-term goals? A job change, for example, may drastically alter your income and your lifestyle. Other circumstances that may affectyour finances might include buying a new house, financing an education, or paying for a wedding. Planning at least a year in advance will help you toadjust to these changes financially.
(4) What can you do to minimize your taxes? A general rule for tax purposes is to defer income to the next year while accelerating deductions for the present year. To defer income, you might postpone selling assetsor you might also purchase Treasury bills or other investments that will mature the following year. To accelerate deductions, you might double upon your charitable contributions, pay your state taxes before year end (if you are not subject to alternative minimum tax), or invest in a tax shelter.
Quite often people (who qualify) will also make contributions to their Individual Retirement Accounts at the last minute for an additional deduction. However, in the long run it’s much better to make your IRAdeposits early in the contribution year rather than wait until you file your income tax return for that year to take advantage of tax-deferred compounding.
(5) Do you need any additional help to implement your plans for the future? A lawyer, an accountant, a stockbroker, or a trust officer can be a tremendous help in any financial matters. If you’re not progressing as youwould like, or if you find you don’t have the time to manage your money properly, you might consider hiring a professional. It could be the oneinvestment that makes all the difference.
(Alan S. Moore is a Financial Advisor with Legg Mason Wood Walker Inc., adiversified financial services and securities brokerage firm that is a member of the New York Stock Exchange, Inc. and SIPC.)
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