Early autumn can be the perfect season to perform a financial wellness check-up. It’s just about the midpoint of the tax year and a relatively quiet period between back-to-school and holiday activities. To begin assessing your financial health, consider our checklist of common financial concerns that we receive here at Magellan Financial — broadly grouped under the categories of healthcare, investments, and spending.
Healthcare Considerations for Financial Wellness
Many employers have open enrollment periods for health insurance in the fall for coverage that starts in January of the next year. You should think back about how well your current plan served you during 2019 and consider any upcoming medical treatments you may need in 2020. While many families make weighing premiums the primary consideration, you shouldn’t only consider the monthly price. Plans that come with the lower premiums won’t always save you the most money when you need to meet high deductibles or uncovered expenses out of your own pocket.
For instance, appendectomies are the most common U.S. surgery, according to the University of Rochester Medical Center and CBS News found an average total cost of the procedure around $33,000. Now any good major medical insurance should cover this procedure, but high deductibles and out-of-pocket limits could still leave you on the hook for thousands. While one study found that the average deductibles for family health plans were about $2,700, many could top $5,000 or more. Individual plans for small business owners without employer coverage can be even higher.
Of course, if you’ve already met your deductible this year, you might consider scheduling appointments soon in order to take advantage of low out-of-pocket costs. That’s also true if you can benefit from using up your flexible spending account balance before the end of December. Some FSAs allow you to roll over a certain amount or give you a grace period that lasts beyond New Years, but others do not. Alternatively, you may want to postpone non-emergency medical treatments until January if you already know you’ll have higher medical bills next year. That way, you can get your deductible out of the way as soon as possible.
Investment Insights for Your Family & Finances this Fall
When you initially started building your financial portfolio you probably had certain asset allocations in mind. As time passes, however, some investments will grow more than others. That’s why you should consider rebalancing your investment portfolio at least one time per year to ensure you maintain your target proportions. In light of current economic development or your own tolerance for risk, you may also decide to change the mix of various investments inside your portfolio.
You might also look at the individual performance of your investments. While you should generally take caution with market timing, you could also be able to strategically realize losses that can offset gains from other sources. At the same time, you can replace any assets you sell with similar ones in order to maintain your portfolio balance. Schedule a meeting with us here at Magellan Finance to discuss your portfolio strategy. While we cannot offer you any specific tax advice, we can put you in touch with tax professionals while we help you make the most of your assets.
Fall Spending Check-Up to Prepare for the Holidays
Halloween, Thanksgiving, Christmas, and other winter holidays are right around the corner. The top 30 percent of Americans will probably spend an average of at least $1,000 on gifts alone during the holiday season, according to CNBC. That figure doesn’t include food, travel, and other festivities. For most folks, that additional spending will translate at least into a temporary bump in credit card balances. That makes this a good time to evaluate your current debts before you begin pulling out plastic too often.
Since it’s the figure that many lenders use to figure out how much you can afford to spend on such large purchases as homes and cars, you should begin by calculating your debt-to-income ratio:
- Add up your month’s debt payments, such as your mortgage, auto loans, student loan, and credit card payments.
- Divide your total debt payments by your monthly income.
- For instance, dividing total monthly debt payments of $6,000 by a monthly income of $15,000 would yield a debt-to-income ratio of 0.40.
With a mortgage, auto loan, lingering student loans, and a credit card or installment plans, it’s easy to end up spending almost half of your income just to service debt, as in the example above. Of course, some debts are better than others. The problem remains that high debt-to-income ratios make it tough to set aside money for investments and savings goals like children’s educations, a new business launch, or retirement. If you already spend too much on debt, you might want to evaluate how much more you want to accumulate during the holiday season.
Finally, make sure you know your credit score. You can obtain a free copy of your credit report every 12 months at AnnualCreditReport.com. In addition, many banks include free credit scores and analysis from at least one credit bureau with their online services. In addition to a low debt-to-income ratio, high credit scores will help you obtain cheaper credit. On the other hand, running up even more debt can lower both credit scores and ratios.
Let Us Help You Enjoy a Healthier Financial Life
Here at Magellan Financial, our clients come to us with many concerns, including healthcare, savings security, and expenses. This financial wellness check-up will let you know where you stand. And as they say, even if it’s not always great news, it’s always great to know.
No matter where you stand, contact us here at Magellan today for help setting solid financial goals and developing a plan to achieve them. We’re here to help you with college, retirement, investment planning, and much more.
The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.