Here’s How To Develop A Gold-Medal Financial Plan In 2021

By Paul Fain

This summer, I have taken up competitive swimming (for folks over age 50). As a rookie, I never realized how many components are involved in a gold-medal performance. For example, Olympic swimmers have excellent stroke technique, strength, endurance; as well as, great starts, turns, and finishes. There are many parallels between swimming and financial planning. So, how do you develop a gold-medal financial plan in 2021?

In financial planning, as in swimming, it should go without saying that good technique and regular practice are required: budgeting, debt management, regular saving, investment diversification, buying the right kinds and amounts of insurance, etc. But, each year (or competition) presents its own opportunities and challenges that require consideration and adjustments.

For example, in 2021:

Are you thinking of selling your house? Low interest rates are propping up home values as much as the temporary supply/demand imbalance. Do your research, if you sell your home, how much will a suitable replacement home cost? Also, consider the expenses of moving and outfitting a new home to your needs and tastes.

Inflation is in the news. The cost of food, gasoline, housing and utilities, among other goods, jumped by 5.4% from this time last year. The Federal Reserve calls these price increases transitory, but many Americans are feeling the sting of higher living expenses. While many investors, particularly retirees, have relied heavily (or exclusively) on bonds or certificates of deposit or money market accounts, at today's low interest rates these assets will no long protect your purchasing power. To beat long-term inflation, investors need some exposure to stocks. Do you need to add more depth and breadth across your investment strategy?

In such a volatile world of uncertainty, it is more important than ever to maintain an emergency cash reserve in case something bad happens like an illness, accident, or job loss. Where can you get extra yield on cash? Nowhere. Short-term rates will likely stay low so we just have to buck up our resolve.

It may be time to update your estate plan. For instance, have you addressed the handling of your "digital assets" after your death? Make a plan for the management of your electronic files, photos, documents, social media accounts, consumer accounts, etc.

Following an election year, proposed tax changes are on everyone's mind, but big tax policy changes are unlikely in 2021. In the meantime, plan with what is known and keep your ear to the rail (read, research, and even prepare hypothetical tax scenarios so your financial plan is prepared for changes).

These are just a few ways to develop a gold medal financial plan for the remainder of 2021. Just remember that getting to the medals podium requires determination, resilience, and patience. In other words, don't wait another four years to update your plan. Like our Olympians, make a daily effort to improve your performance.

Paul Fain is a Certified Financial Plannerâ"¢ and chairman of Asset Planning Corp., a financial planning and investment management firm based in Knoxville. He welcomes comments and column ideas, but cannot offer specific personal financial advice. Write to him at [email protected].