Understanding the current health of your finances starts with having a solid plan in place, but it depends on following the plan so you stay on track and continue working toward your financial goals. That’s where a financial wellness check can be useful. It can help you make sure you’re hitting the right milestones in your plan — and also help you check that your plan is working for you.
Where to start? Here, John Knowles, lead business growth strategy consultant at Wells Fargo Wealth & Investment Management, shares six questions that can set up your financial wellness check.
Are you adding to your investment accounts on a regular schedule?
Saving often and early is rule No. 1 because of the power of compounding. When you leave any investment gains in your account rather than taking them out, those gains have the opportunity to start earning returns as well.
Taking full advantage of your employer’s retirement plan — typically a 401(k) — is a good place to start. That includes contributing enough to qualify for any potential company match, something Knowles stressed to his daughter when she entered the workforce. “If the company is going to match you up to 5%, put 5% in at least,” he says.
Are you being smart about taxes?
With accounts such as 401(k)s and IRAs, the money has the potential to grow tax-deferred. That means you pay taxes on the funds only when you withdraw during retirement. But with choices such as Roth IRAs or Roth 401(k)s, you pay taxes on the money at the start, but then don’t pay taxes when you take qualified withdrawals. (Other specialized accounts, such as health savings accounts and flexible spending accounts, may also provide tax advantages.)
“It really boils down to not putting all your eggs in one tax basket,” he says. “Putting most of your wealth in tax-deferred savings accounts means when you withdraw your money, you may potentially incur a large tax bill. Diversification with taxes in mind may help reduce it.”
Are you getting advice from a professional adviser on a regular basis?
Having a financial wellness checkup with a financial adviser and other professionals on topics such as taxes, estate planning and insurance is like getting health input from a doctor, Knowles says.
A financial adviser can evaluate your situation by taking measurements on a regular basis or whenever a significant life event happens, such as a job change, marriage or divorce. This can help determine where you stand and what actions to consider. “Doctors don’t ask you what your blood pressure is, they find out,” he says. “Once they have all the data they need, they make a recommendation. In this case, it’s your financial adviser prescribing what can help improve your financial well-being after taking all the necessary measurements.”
Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company.
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This article was written by/for Wells Fargo Advisors and provided courtesy of Ponte Vedra Wealth Management Group in Ponte Vedra Beach at 904-273-7918.
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