Spring Training for Your Finances

Baseball season may be just starting, but the As and Giants have already been on the field for weeks, using spring training to prepare for the competitive season ahead.

Similarly, we can all benefit from a little spring training with our finances – using the April 15 tax deadline as an opportunity to assess how well we are prepared for the future.

Baseball is a good metaphor for personal financial planning (actually, baseball is a pretty good metaphor for anything). Both require a team of players – in the case of your finances, that means a team made up of your tax accountant, estate lawyer, investment advisor, and insurance agent. Both require one person to be the coach, coordinating the other players. Both have cycles or seasons:

• Spring Training. Assemble your team of professionals. Make sure you have the right people in each position – skilled, proactive, communicative (sometimes one person may play a couple of roles).  Work with them to create a winning long-term plan to achieve your personal financial goals.
• Opening Day. Put your team on the field. Once a year, bring your advisors together in person or by conference call. Go over your strategy for the year – is it in line with your long-term goals? Does it take account of changes in your life situation or in the economic landscape?
• Dog Days. You’re going about your life and business, but your team continues to work for you, day in and day out.
• Playoffs. Here comes a crunch – changes in the investment climate or in your personal circumstances. Divorce? Market turbulence? Leaving a secure job to launch a start-up? You need to check in with your team, refine your strategy, make sure everyone understands the new field and is playing the best game for that field.

And then, the season starts all over again.

So that brings us back to April. Spring training for the A’s and Giants, tax season for those of us not lucky enough to be down in Arizona. Tax preparation is a good occasion to touch base with your accountant, not just about your tax return but about your overall tax strategy.

When I’m working with a client on his or her taxes, I always ask, “Anything new in your life?” I ask if they have started putting money away for college, and point out some of the various tax-advantaged ways to do that. I ask if they have a living trust. I ask if they have life insurance; and if they don’t, I give a quick explanation of the concepts of term and whole life coverage. I can’t enter into a full-blown exploration of insurance options or estate planning, but I can give some basic food for thought.

And then I make a note to follow up with the client about these issues after April 15th.

If your tax accountant isn’t interested in doing proactive, long-term tax planning with you, find another accountant. If he or she isn’t willing to coordinate with your other advisors, find someone who is. If he or she isn’t available for periodic updates about your situation and strategy … well, you know what I’m going to say.

You are the one responsible for choosing your advisors – your team – and for getting the most out of them. Once you’ve got your master financial plan in place, set a schedule for periodic check-ins and adjustments:

• Tax planning. Your tax strategy should be updated once a year – and now, when you’re in touch with your accountant about your tax return, is a good time to do this.
• Investments. Touch base with your investment advisor at least quarterly to make adjustments based on what is happening in the markets.
• Insurance. Check your insurance coverage every two or three years – more often, of course, if your insurance needs change due to things like purchase of a vacation home.
• Estate planning. Your estate plans can go the longest between reviews, maybe every 10 years. But here – as in other areas – consult your advisor whenever there are changes in your family or life circumstances.

I know it can be hard making time to think about your financial future when you’re caught up in present-day challenges. And some aspects of financial planning – such as estate planning, with its acknowledgement of our mortality – are not the most fun to think about. It’s tempting to put these discussions off indefinitely, or to say, “Okay, I did my plan, now I don’t have to think about it ever again.”

But the A’s and Giants don’t wait for opening day to work on their pitching and fielding. And their coach doesn’t say, “Okay, my team is in place, now I don’t have to think about strategy anymore.”

Take the time now for some financial spring training. It will pay off. You may not end up in a World Series parade down Market Street, but you’ll be a hero to your family and loved ones.