Change is the only constant in life, making it essential to prepare for the unexpected as we step into the new year. Pure’s Financial Advisor, Robert Lucente, CFP®, shares actionable steps to help you navigate financial challenges and build a solid foundation for 2025 and beyond.
Transcript
Uncertainty is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises, so an important new year goal is to prepare for the unexpected.
Create an Emergency Fund
If you aren’t retired, consider creating an emergency fund with three to six months’ worth of essential living expenses set aside in a savings account. The emergency fund can help you cover unexpected but necessary expenses without having to sell more volatile investments. Try to project the cost of essential big-ticket items. If you have a big expense in the near term, like college tuition or roof repair, put the money aside. If you know you’ll need the money within 1-3 years, keep it in relatively liquid, safe investments like short term CDs, or a savings account, or money market funds. If you have more than a few years, invest based on your time horizon.
Keep your Total Debt Load Manageable
Don’t confuse what you can borrow with what you should borrow. Keep the monthly costs of owning a home below 28% of your pre-tax income, and your total monthly debts below 36% of your pre-tax income. Try to pay off credit-card debt and avoid borrowing to buy depreciating assets, such as cars. If you have debts, consider consolidating your debt in a low-rate home equity loan or line of credit and implementing a schedule to pay it back.
Focus on your Overall Investment Mix
Have a targeted asset allocation that is a strategically proportioned mix of stocks, bonds, and cash in your portfolio—that you’re comfortable with, even in a down market. Make sure it fits your long-term goals, risk tolerance, and time frame. The longer your time horizon, the more time you’ll have to potentially benefit from up or down market.
Make Sure you and your Property are Insured
Purchase life insurance if you have dependents or other obligations. First, take advantage of a group term insurance policy, if offered by your employer. Such programs don’t generally require a medical exam and can be a cost-effective way to provide income replacement for dependents. Protect your physical assets with property-casualty insurance. Check your homeowner’s or renter’s and auto insurance policies to make sure your coverage and deductibles are still right for you. Consider the pros and cons of long-term-care insurance. If you’re considering a long-term-care policy, look for a policy that provides the right type of care and is guaranteed renewable with locked-in premium rates.
Update or Prepare your Estate Plan
Review your beneficiaries, especially for retirement accounts, annuities, and life insurance. A will isn’t just about transferring assets; it can provide for your dependents’ support and care and help avoid the costs and delays associated with dying without one. Have in place durable powers of attorney for health care. In these documents, appoint trusted and competent confidants to make decisions on your behalf if you become incapacitated. And consider a revocable living trust. This is especially important if your estate is large and complex and you want to spell out how your assets should be used in detail, or if you have dependent children and want to detail how assets should be managed to support them, who will manage the assets, and other issues.
Finally, remember you don’t have to do everything at once. There’s a lot you can do to prepare for the unexpected by taking one step at a time. Use a checklist to make some real progress on your journey this year. If you’d like help with these or any other financial matters, contact Pure Financial Advisors for a free financial assessment.
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IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
• Charitable gift annuities typically pay lower interest rates than regular annuity products, they are irrevocable and are only safe as long as the charity is around.
CFP® – The CERTIFIED FINANCIAL PLANNER® certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® Certification, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the certification.
