Get With The Plan: January 5, 2014

1514The start of the new year is the perfect time to get your finances in order.

We asked some of the certified financial planners who regularly contribute to Get With the Plan to weigh in on what investors should be doing right now. Here’s what they said.

€…Don’t be overconfident

We saw a great run-up in the stock market in 2013, with the S&P 500 gaining almost 30 percent, the Dow Jones Industrial Average up 26.5 percent and the Nasdaq up a whopping 38.2 percent.

“Don’t mistake a bull market for brains,” said Brian Power of Gateway Advisory in Westfield. “It didn’t take much hard work to make money in the stock market the past two years. Don’t let that lull you into thinking that it always comes that easy.”

That means you should have a plan — a plan that will help you stay on track no matter what the market does. If you have an asset allocation strategy and a diverse portfolio, you won’t need to worry about all the day-to-day market blather.

“Where the market is headed in the next 12 months is unknown to everyone, so the best thing is to be humble and admit that you don’t really know what is going to happen,” said Howard Hook of EKS Associates in Princeton, who says investors shouldn’t be tempted to buy a hot stock touted by a radio ad or TV program, or try to time the market.

And if you’ve been sitting on cash that you don’t need in the short-term, get fully invested, said Brian Kazanchy of RegentAtlantic Capital in Morristown. He said markets go up about two-thirds of the time, so probability is in your favor if you invest a lump sum. If that’s too risky for you, he said, dollar-cost-averaging over three to six months is fine — “just realize that the longer you delay in investing increases the amount of return you may miss.”

Rebalance your accounts

Lots of investments earned gobs of money in 2013, so this probably caused a big drift from your initial asset allocation.

“In each position, you should look to rebalance to enjoy those gains, and redistribute to other asset categories so as to not take on any more risk than you need to achieve your goals,” said Jody D’Agostini of AXA Advisors/ RICH Planning Group in Morristown. “It is all good when markets continue to rise, but you could feel considerably more pain if the market corrects.”

While you’re at it, take a new look at your risk tolerance and make sure your investments are in line with how well you can stomach the ups and downs of the stock market.

“If you have an 80 percent stock portfolio, you have the ability to lose around one-third of your money. Are you okay with that?” said Jerry Lynch of JFL Total Wealth Management in Fairfield. “If the answer is no, then reduce your allocation to something within your pain threshold so that you are not constantly getting in and out of the market.”

€…Save more

The start of a new year is a great time to increase your contributions to an employer-sponsored retirement plan, such as a 401(k) or 403(b). Maximum employee contributions for 2014 are $17,500, and those over age 50 can add “catch-up” contributions for a total of $23,000.

“If you cannot afford those amounts, be sure you are contributing at least the minimum amount to get the full matching employer contribution,” said Power.

If you’re getting a raise, consider increasing your contributions by the full raise in your salary or at least by a meaningful percentage of the raise, Power said. It’s money you didn’t have in 2013, so you shouldn’t miss it in your paycheck, and your retirement plan will thank you for it down the road.

€…Review your budget

The beginning of the year is an excellent time to review your family budget, just as a business would do to plan for the next 12 months, said Douglas Duerr of Duerr Financial Group in Montville.

“This will let you allocate funds to things you really need to do, as well as help to set aside funds for things you should do, like college savings or retirement, and things you want to do like a vacation,” Duerr said. “A little planning and time spent on this could mean a great deal in achieving your overall goals.”

Check your insurances and estate plan

Your family’s financial stability could be in jeopardy if a breadwinner dies or becomes disabled, or if your family is sued. Protect yourself and your assets with the proper auto, homeowner’s and liability insurance, and guard against a loss of income with life and disability insurance.

“If your plan only works if everything goes right, then you have a pretty bad plan,” Lynch said. “You have to assume that something will go wrong and a good plan takes that into consideration.”

Also make sure you have updated wills, health care proxies and powers of attorney.

Get A Plan!

Don’t spend more time planning your 2014 vacation than your financial future. The earlier in life and the more frequently you address your finances, the better.

Power said he’s seen too many people who were surprised by a sudden change in their situation, such as a death in the family, getting laid off or facing a health scare. They are then in something of a panic because they were not prepared.

“Being reactive instead of proactive to issues like these can cause a lot of stress when it comes time to face up to these potential challenges,” he said.

Proper planning can’t be done in an hour. It can take weeks or months, and it’s an ongoing project. Don’t rush the process.

“The key is to start working on it,” Duerr said. “Even accomplishing a small item that needs to be done is a start and there is no time like the present to begin.”

If you’re not comfortable doing it yourself, consider working with an adviser.

“The basic concept of planning is easy: Save money, invest on a regular basis and live below your means,” Lynch said. “The details associated with that can be staggering.”

That’s where an objective financial planner comes in. A pro can help you create an investment strategy that will help you reach your goals, make your finances more tax-efficient and reduce your tax liability, and consider items like your estate plan.

You can search for someone in your area on the websites for the Financial Planning Association and the National Association of Personal Financial Advisors.

Or, send an e-mail to to participate in Get With the Plan.