TIPS FOR YEAR-END FINANCIAL PLANNING

1. Assess your current plan progress.
Look at any areas of your 2017 written financial plan that you have not yet accomplished and endeavour to complete them in the remaining days, or include them in your 2019 plan.

2. Review your current cash flow.
Take a deeper look at what you are spending your money on each month and determine what opportunities there are to find “painless savings”. You may even find some easy ways to save a few extra Naira for your long-term goals.

3. Calculate your asset allocation.
The run-up in stocks may have increased your stock allocation and you may hold more risk than you are comfortable with. If so, look at making some re-allocations – and don’t forget to consider the tax implications of any move inside a taxable account.

4. Estimate if you are on track to maximize your retirement contributions.
Try not to miss any valuable tax deductions; this is a great time of year for retirement top ups, especially with year-end bonuses.

5. Talk with your tax and financial consultants.
Explore other ways to save on your tax liability. There may still be time to act, but time is running out!

6. Explore and take advantage of your tax reliefs.
With the aid of your tax consultant and accountant, you can plan and take advantage of tax reliefs and incentives that available for you in the current year. Ensure that you are not exposing yourself to any undue tax burden.

7. Review your estate planning.
Each year we should really take the time to review our wills and general estate planning. Your year may have changed your estate planning more than you thought and taking the time to engage the topic will prevent it from running ahead of you in the future.

8.  Consider what life changing events you may face in the new year.
For example: if your employer is struggling, planning job cuts, or if you are considering a job change, do you have enough liquidity on hand while you look for a new position? If you are buying a new house, are there steps you can take now to improve your credit and accessibility to funds?

The financial planning process is continual and never ending. Reviewing year-to-date progress and anticipating future needs can lead to better results. Use this year-end period to assess your current situation and identify future planning opportunities.

Multiple Bank Accounts - Pros & Cons

The best way to ensure that you build wealth and avoid debt is to diligently plan and save as much money as possible for both future needs and desires. However, exactly how you handle your savings can depend greatly upon your financial habits. Some financial experts recommend setting up a simple savings account tied to your current account, while others advocate opening multiple accounts to be used for various savings targets, according to www.moneycrashers.com.

There are pros and cons to each approach. Of course, a major part of your final decision depends on your financial personality.

Questions about your savings habits

Do you have a budget that includes room for saving?

If not, you need to create one, even if you can only save a tiny amount from each paycheque. Use financial software or just a pencil and paper to list all your income, all your fixed expenses (such as your rent or mortgage and car payment), and your fluctuating expenses (such as groceries and discretionary spending). You may need to track your spending for a few weeks to find places to cut spending so you can build your savings.

Are you comfortable with an automatic transfer of funds into a savings account?

Automatic savings are the easiest way to ensure consistent savings deposits. If you are comfortable with it, have a set amount transferred to your savings from each paycheque. Over time, you can significantly increase your savings.

Do you frequently tap into your savings for non-emergency spending?

If you regularly spend money from your savings account, you may need to open an account that is more difficult to access, such as a fixed deposit or a money market account that limits you to six withdrawals per month. If you choose a fixed deposit, be aware that most charge a penalty for early withdrawal. If you are dipping into your savings often, this may be a sign that you need to reorganise your budget.

Reasons to have multiple savings accounts

The ease of opening online bank accounts allows you to open multiple savings accounts within minutes, either with the same financial institution or spread out among several. Doing so might make sense for you for the following reasons:

You have multiple savings goals: The main reason to open more than one account is to track exactly how much you have saved toward each individual savings goal. For example, if you want to save three months’ worth of income in an emergency account, set money aside for a down payment on a house, and fund your summer vacation, then you could open three accounts to see at a glance how close you are to reaching your goals.

You need to separate your savings: You need to keep some of your money on lock-down so it is available if you face an emergency. Consider keeping an emergency fund in an account that is easily accessible, and then store the remainder of your funds in accounts tied to various short- and long-term targets.

Keeping some money in another financial institution means that you are more likely to always have funds when you need them.

You can receive multiple perks: While you may want a bank with an ATM near your home or workplace, online banks often offer better interest rates, and some institutions give you a bonus for opening an account. You may be able to take advantage of perks from several institutions if you open multiple accounts.

Reasons you may not want multiple bank accounts

Despite the various advantages, there are several reasons you may want to keep your savings in one place rather than in multiple accounts. It can be hard to reach minimum balance requirements. Many savings accounts require you to open an account with certain balance or require you to maintain a minimum balance in order to earn interest.

Building banking relationships can be more difficult: Even if you choose to have multiple bank accounts, it may pay to keep them with one financial institution, as some banks provide lower interest rates on loans or reduce fees for customers with multiple accounts.

You could lose interest: While the interest paid on most savings accounts is pretty low, some accounts pay a higher interest rate on a larger balance. Spreading your funds into many accounts may keep you from earning the highest rate.

You may find it confusing: If you have some funds allotted to save each month or you receive an unexpected bonus or gift, you would have to decide whether to put it all toward one goal or to split it between various accounts. If you have only one account, you won’t have to decide immediately how to appropriate the money.

Multiple accounts can complicate automatic transfers: If you choose to have money transferred from each paycheque, it may be too much to keep track of if you are having cash transferred to a variety of accounts.

You may lose some money: If you are less-than-perfect at keeping track of your finances, you may be better off with one account – or at least with keeping all your accounts with one financial institution so you don’t forget what you have and where it is.

You could pay higher fees: Some financial institutions charge fees for their accounts, especially on accounts with a low balance.

Make sure you’re not overpaying by dividing your savings

If you are supremely organised and want to keep your funds for various needs and desires separate from each other, you may be a good candidate to open multiple savings accounts. However, be sure you aren’t missing out on the perks of having a high balance with one financial institution or having fees eliminated because you have multiple accounts with one bank or credit union. You should compare interest rates and fees on all accounts before you make your final decision.

Do you prefer having one savings account, or do you keep your money in several places?

Credit: The Punch