Financial Checkup: 6 Financial Tips for Success!

Complete this checklist so you don’t have to worry later on?

Are you in the process of switching jobs, or dealing with life events such as, moving, marriage, school, or a death in the family? We typically wait until the last minute to deal with the things we don’t want to deal with, like financial planning. This is understandable. On one hand, there’s a lot of emotional baggage and tough conversations that can take place. Conversations that can make people uncomfortable, and who wants to be uncomfortable?

That said, on the other hand, after you’ve experience the bad side of financial planning, or lack thereof, and seen how it can impact your loved ones, you naturally are much more proactive about getting your affairs in order. One of the best things you can do for yourself is have a checklist and review process for your financial goals. Check in with your loved ones and review your financial goals on a periodic basis. I’ve written a generic checklist on financial topics to review periodically. This can help to make sure you’re making the most out of your employee benefits, retirement, and that your loved ones are taken care of.

What Employee Benefits Are Provided?

You know that big packet of papers they give to you in a big white envelope? Read that. Well, not necessarily word for word, but get to know the big important items. I’ll do my best to break down common benefits and how to utilize them to make quick decisions about your financial situation.

Do yourself a favor and do these five things ASAP.

1. Cash Flow – Salary, Taxes, Expenses, & Savings:

There are many reasons we switch jobs. It can be anything from a better opportunity, a new field or career, people, or location. Salary is usually an important component. I know money isn’t everything but it can be a driving factor. Consider the following:

  • Keep your lifestyle in check. There’s no need to be frivolous and ramp up your spending along with your raise. I know it’s tempting. Maybe give yourself a paycheck or two to celebrate your accomplishments. You deserve it, but make sure you stay modest, live within your means, and put your extra income towards your financial goals sooner rather than later.
  • Review your savings account. How much cash do you have available? It’s recommended that you have three months in basic living expenses in cash if you’re single, and six months if you’re married with one spouse working. Keep in mind, this is a rule of thumb. It varies from person-to-person. You want to have enough cash to be able to support you in an emergency, such as a lay off or health event.
  • If you have a retirement plan available through work, you can allocate your salary increase here. There are also retirement options outside of work such as Traditional and Roth IRAs, or individual or joint investment accounts.
  • Review your pay stub to make sure HR/payroll is on top of everything. This includes federal tax withholding, FICA tax (social security and medicare), insurance premiums, and retirement contributions.
  • Preferably, you would like to withhold less for taxes during the year. The goal is to have zero, or a small amount of money, for a refund. You don’t want to be giving the IRS more money than they deserve throughout the year. It’s your money, so keep it in your pocket. This allows it to be put towards other goals such as retirement or savings. That said, a larger refund can be used as a forced savings strategy if you have trouble putting money back throughout the year.

2. Tax-Advantage Medical Savings Accounts: HSA | HRA | FSA

See if your employer has any of the above accounts available to you. Health care costs are one of the biggest threats to your hard earned retirement dollars. Medical costs are projected to be increasing at a rate of double inflation or around 6%. Proper planning must be done to get ahead of these costs. The plans below can help you prepare.

HSA | Health Savings Account

These accounts can be used when you have a high deductible health plan (HDHP), which means:

  • A deductible of at least: $1,300 for individuals or $2,600 for families.
  • Maximum out of pocket expenses can’t exceed: $6,550 for individuals or $13,100 for families.

An HSA allows you to make annual contributions up to $3,400 for individuals and $6,750 for families. This account is tax advantaged meaning you can deduct your contributions on your form 1040 or personal income tax return. The funds can be used to cover various medical expenses including:

  • Health insurance premiums
  • Health insurance deductibles
  • Long term care insurance
  • Dental and vision
  • Chiropractor and other professional services
  • Various medical equipment

Be sure to check the list of eligible expenses on the IRS website. The list above doesn’t even scratch the surface of what’s available.

Investments are also available in HSA accounts. I’d say once you have enough money to cover one year’s worth of total out of pocket expenses for your health plan, you can begin to invest anything over this amount. This essentially makes the HSA an investment account to cover medical expenses before and during retirement.

HRA | Health Reimbursement Account

With an HRA you do not have to have a HDHP. The account is technically owned and funded by your employer. The employer dictates contributions and reimbursement of medical expenses. The funds are not included in income and are pre-tax. This allows you to be reimbursed for various medical expenses and insurance costs. Transactions can be put on an HRA debit card. Funds can be available in the HRA account, or by submitting the expenses online to reimbursed. Reach through your HRA guidelines to know the process for payments.

FSA | Flexible Spending Account

An FSA is a great tool for medical expenses and dependent care. Money is deducted from your paycheck to the FSA on a pre-tax basis. As the funds accrue, you can use them for medical expenses, as well as dependent care/daycare for your children. The maximum contribution for health FSAs is $2,600. Dependent care FSAs are treated a little different. You can contribute up to $5,000 if you’re married, or $2,500 if you’re single. You must use the money in the FSA by year end. It doesn’t rollover to the next year.

3. Insurance

Wait, wait, wait, wait, please don’t stop reading! I know it’s boring BUT it’s also important.

You need to know what kind of insurance is available to you and how much coverage you’re eligible for. There are a lot of changes going on with the Affordable Care Act. Health insurance premiums, deductibles, and out of pocket expenses are being impacted. Premiums have been increasing year over year. Carriers are coming in and out of the marketplace causing people to have to find new coverage, so you need to keep your eye on your policy. This goes for both employer and individual/family plans on the exchange.

In addition to health insurance, employers can offer life and disability on a group basis, typically at reduced rates over individual policies outside of work. Usually during open enrollment you can avoid the physical exam and pre-existing conditions. If you do not qualify for insurance on an individual basis you may be able to get coverage from your employer. This can be a big benefit if you have a health issues, such as pre-existing conditions, and do not qualify for insurance otherwise.

Know Your Insurance Premiums

What kind of insurance is offered – Health, life, or disability?

Who pays the premiums – Employer, employee, or split?

  • With disability insurance this can affect how benefits are taxed as they’re paid out.
  • With life insurance this can impact if your premiums are included in income. The maximum death benefit an employer is allowed to provide tax-free is $50,000. This refers to the premium, or cost of insurance, that will provide you with a $50,000 benefit. Any amount above this will be considered taxable income to the employee.

What Types of Insurance are Available?

Health Insurance

Regardless if health insurance is offered, please get coverage. A lot of small businesses don’t offer health insurance. A stipend could be given to help pay for a portion of individual premiums if they do not offer group plans. It can be enticing to take the money and run, or be frustrated with the current state of the affordable care act, and choose to go without coverage. It is getting expensive. I get it.

But, going without coverage can be financially devastating should a major health event occur. Let’s say you become ill and have an extended stay in the hospital. Medical bills for something like this can be hundreds of thousands, if not millions, of dollars. I know it’s frustrating to have your premiums, deductibles, and out of pocket expenses increase each year, but keep in mind the alternative.

Life Insurance

If you’re thinking about committing to term life insurance above a $50,000 death benefit look into an individual policy outside of work. The problem with work policies is that they may not be portable, or premiums could hike significantly, should you leave your job. If your policy isn’t portable, at that point, you don’t know if your new employer will have life insurance available. You could be caught without coverage.

Insurability risk arises due to the fact that a health event could occur between now and your next job. This results in you not being able to get coverage outside of work. As time goes on this risk increases, so you may want to lock in a policy and rates sooner than later. You’ll be able to get an individual term policy for fairly cheap and get adequate coverage. It’s not uncommon to see benefits from $150k to $1mm+ depending on needs. Things to consider when thinking about life insurance are debts to be paid, college costs, living expenses, and significant other’s ability to work.

Disability Insurance

Disability insurance can be offered either for short term or long term coverage. Short term is considered less than one year. Long term can be anywhere from over one year and last all the way until retirement. The need for disability insurance is determined by calculating your gross income, living expense, and how long you will work for. In the event that you become disabled and aren’t able to work, how much income will you need? This calculation can be based on minimum monthly bills or expenses or on a percentage of average or current salary – usually around 60%. The higher the benefit the more expensive the premiums will be.

Elimination Period

An elimination period will have to be satisfied before you can being to receive payments. Be sure to know how long your elimination period is. This will allow you to plan ahead and have an adequate savings available to cover living expenses during this time. Policies differ in elimination periods and they can be changed, which will impact your premiums. A longer elimination period is one way to decrease your premium payments.

Definition of Disability

It is important to know and understand your policy’s definition of disability. There a different definitions which determine if you’re considered disabled and eligible for benefits. These usually apply to an inability to perform certain job functions or an occupation. The definitions can affect the cost of your policy, but some definitions are much more liberal than others, therefore making it easier to qualify for disability.


This definition of disability is the most liberal and broad definition. Doctors and medical professionals tend to get this type of coverage. It states that if you’re not able to perform any job functions of your job you considered disabled. An example would be a surgeon not able to use their hands to perform surgery. He would be considered disabled under an Own Occ policy.


This is definition is more stringent that Own Occ. In the example above, if the surgeon is unable to use his hand, but can still work as a professor teaching or in engage in any gainful work which he is qualified based on schooling and experience, he is considered NOT disabled. The insurance company will have an analysis done to determine if a person is considered total disabled and eligible for full benefits. Know that there is a difference between disability definitions and be sure to know what your policy has.

Social Security’s Definition

The Social Security Administration is by far the most stringent. It is very difficult to qualify for disability benefits through the SSA. This is what you will have to rely on should you not have a policy in place, either through work or individually.

4. Rollover Your Old Retirement Plan From Your Previous Employer: Step by Step Guide

Find Your Old Statements

First things first, start by locating your old retirement plan(s) account statements. This can be done by:

  • Statements sent by mail: Locate your old statements that have been sent by mail. Some employers will send you quarterly statements via snail mail or email.
  • Login online: Login online to access statements and account information.
  • Call HR: Call human resources to assist you.

Once you have your statements confirm from the plan administrator that the plan allows for a rollover.

A couple notes:

  • Defined benefit plans, or pension plans, can have various payout options. These need to be looked at to make sure you make the best decision.
  • SIMPLE IRAs also have a 2 year rule where the account must be opened for 2 years before you rollover the funds into a traditional IRA. If the 2 year mark is not met then the rollover is considered an early distribution subject to income tax and a 25% penalty.

Open an IRA

If you don’t already have an IRA opened already then you will need to do so. You can go online to various custodians, such as TD-Ameritrade or Fidelity, and have an account opened in a day or two. Be sure to open a Traditional IRA and not a Roth IRA. A Roth IRA is funded with after tax dollars, and will subject your retirement plan funds to be included in income, assuming the plan/account is pre-tax.

Call Your Old Employer’s Plan Administrator

Your account statement should have a phone number to contact regarding questions about your retirement plan. When you get someone on the phone state that you are no longer employed with the company and would like to rollover your retirement plan to an IRA. Typically they will ask:

  • The representative will confirm your personal account information and address of record. The address of record is usually your home address but make sure it is correct.
  • Which custodian will be receiving the funds/where the IRA is held, e.g. TD-Ameritrade or Fidelity.
  • Account title and number of your IRA.
  • Make sure this is a direct rollover, or trustee-to-trustee transfer, avoiding the 60-day rollover rules where the employer is required to withhold 20% for federal taxes.
  • The check should say something like “TD-Ameritrade Clearing FBO John Smith IRA #987654433.”

Once they have all of this information they will usually send the check to the address on record within 5 to 7 business days. Sometimes you can have it sent to your advisor’s office or straight to the custodian. Be sure you know where the check is going.

Check Your Mail

Monitor your mail regularly for your rollover check if it is coming to your home. Once you receive it, give it to your advisor or get it to your IRA custodian. This can be done by mail or by going to their branch. The funds will then be deposited into the IRA account. The next step is to invest your money. You have now successfully rolled over and consolidated your retirement accounts.

Healthcare professionals should also review their entire benefits package. Many hospitals have great benefits that can save you money and put you in a better financial position. This can include various types of insurance, HSA accounts, FSA accounts, 401(k) match, Roth 401(k) for contributions, and various investment options. Be sure you know these and are taking full advantage of these benefits.

5. Review Your Investments

Now is a good time to sit down and review your investments. This includes everything from retirement accounts, brokerage accounts, real estate, businesses, and savings. You need to have a good understanding of your entire financial picture and investment portfolio. This entails knowing your financial goals and how you should be invested in order to accomplish them. How much cash do you need? When do you expect to retire? What do expenses look like in retirement? Do you want to fund a business in 5 or 10 years? These are the things you need to think through in order to know how to be invested in order to accomplish them.

Asset Allocation: Stocks | Bonds | Cash

What do your investments look like all-together, as a single portfolio?

There are a bunch of online tools and apps that can link your accounts and provide you with an overview/breakdown of your portfolio. Personal Capital is a good one. Pay attention to your overall asset allocation and how each individual asset class is broken down. If you have rental properties, how much of your balance sheet and portfolio are they taking up? I hope only a small portion.


If you’re investing for the long term, you want to be globally diversified with a balance of stocks, bonds, and cash. Broad exposure through ownership of thousands of companies can be accomplish by investing in mutual funds and exchange traded funds. This provides you with the benefit of diversification and lets the market work for you.

Diversification reduces the impact of a single company, or individual stock, to negatively affect your portfolio. It eliminates any unsystematic risk, which is defined as specific risk that can be diversified away. This includes business risk, sector/industry risk, or country risk for example. An adequately diversified portfolio should only be subjected to systematic risk, or market risk, that can’t be diversified away and in turn affects the market as a whole. This is something like interest rate fluctuations, recessions, or war. You want to stay diversified, and not have all your eggs in one basket, and avoid having the stress and very real risk of losing all your money. History has shown us time and time again how even the most established and successful companies can go out of business or lose value overnight.


Why do we invest in the stock market?

Well, there are numerous reasons. These can include a hedge against inflation, capital accumulation, retirement, college education, or generational wealth transfer. Investing in the stock market should be a long term proposition. By long term I mean you want be needing the money for at least 7+ years or more. This gives you time to embrace the shorter term market volatility. It allows you to ride out any dips in the market, thereby increasing your likelihood to achieve higher positive returns.

I am not a proponent of individual stock picking or active management, as you may be able to tell from the diversification piece above. That said, I absolutely believe in investing in the stock market. This should be done primarily through mutuals funds and ETFs. In terms of constructing a portfolio or investing your hard earned dollars, you need to know the goal for your money. A simple example is retirement. Let’s assume your 40 years old and plan to retire at age 65. This means you have 25 years until retirement and when start to pull from your portfolio. I’m fine with being more aggressive with this portfolio since you won’t need the funds any time soon.

Which funds should I invest in with my money?

When thinking through portfolio construction, I always start with a market weighted approach. A high level look at the total stock market by region consists of approximately 52% US stocks, 37% international developed stocks, and 11% emerging market stocks. That means almost half of the world’s companies are outside of the US. A lot of people have a home bias, meaning they show favoritism by overweighting their portfolio to the US or completely exclude international markets from their portfolio. I believe this to be a fool’s errand.

Research shows us that international investing in developed and emerging markets can increase your returns and reduce the volatility of your portfolio. This is because the asset classes are not as heavily correlated, but both have higher expected returns over time, relative to cash or bonds. This increases your diversification and prevents you from having to outguess the market by using active management, or whatever else is available, such as technical or fundamental analysis. Because you are diversified your portfolio will be more likely to capture the positive returns of the market by being exposed to all areas.

So, back to my first point. Start with a market weighting. I usually add a 5% position to global real estate or REITs, which are usually available to you in the fund line up within your 401(k) or employer retirement plan.This allows you to take advantage of various real estate industries such as, residential, commercial, and manufacturing. REITs are required to payout 90% of their taxable income to shareholders. This means they produce high dividends and interest should you invest in them. If you have REITs in a taxable, or non-qualified account, I’d recommend repositioning these assets into your retirement, or qualified accounts. This will prevent you from having to include the dividends/interest in income. If you are in a high tax bracket this could save you up to 40+% in taxes on the income from these funds just by repositioning them into a qualified account.

Our portfolios tilt to areas of the market that are expected to do better over time. Research shows that there are premiums, in which you are compensated for, by investing in certain areas of the market. These areas include value stocks over growth stocks, small stocks over larger stocks, and highly profitable stocks over less profitable stocks based on relative price and profitability of operating income. We overweight our portfolios to value stocks, small stocks, and higher profit companies. This in theory should capture higher expected returns than the market, since we have a heavier exposure to these market premiums. This by no means a fool proof plan, and outperformance does not happen every year as recent years have shown, but over the long term these areas are expected to outperform.


Why do we invest in bonds?

When you think of bonds or similar interest bearing investments, such as CDs, you may think of your grandparents or those who grew up in the great depression. The purpose of bonds, or fixed income, is to receive an income stream of interest payments. You give a company or municipality or your money, and they’re required to give you interest payments for the term of the bond. At the end of this term you’re supposed to get your principal investment back. Notice, I wrote supposed to. Typically bonds are considered safer, more conservative investments, but as we saw with 2008, this isn’t always the case. Bonds are subject to ratings agencies that give the bonds or companies a credit rating. You have investment grade and non-investment grade, or high yield. Typically, bonds are more conservative in nature and less volatile than the stock market.

As you approach retirement and start to withdrawal money from your portfolio, you may want to rebalance your portfolio, to have more exposure to bonds.

Think of bonds as your medium term money ranging for need in the next 2 to 7 years. As mentioned above, if the stock market takes a dip and temporarily loses half it’s value, you can draw on your bond portfolio during this time. This will allow you to ride out the lows of the market and wait until it bounces back. Rebalancing typically occurs during this period in which you will sell some bonds and buy stocks to get your portfolio back to it’s target asset allocation.

An example of a target asset allocation would be 60% stock and 40% bonds. If the stock portion dropped by half to 30%, the portfolio would be 30% stocks and 70% bonds. This means you would be way too conservative and not be positioned to capture the growth from the stock market. So, what you would do is sell 30% of your bonds and buy into the stock market arriving back to the 60/40 asset allocation. This forces a buy low sell high strategy, since you are selling the thing that went up and buying the thing that went down. The same goes for the reverse of the situation.

How much of my portfolio should be in bonds?

I typically recommend having at least 5 to 7 years of living expenses of your portfolio in bonds. If you have $1,000,000 in retirement, and need $40,000 per year from your portfolio for living expenses, that would be $200,000 to $280,000 in bonds. This would be a more aggressive portfolio due to the relative need for annual capital. The allocation would be around 75% stock and 25% bonds. That said, there are other factors to consider such as one’s risk tolerance and emotions. If you’re not comfortable with volatility of the market and that’s too aggressive for you then the allocation will need to be reviewed. A more conservative approach like a 50/50 allocation may be in order. Also, you don’t always want to take on excessive equity exposure just for the sake of it, especially if you don’t have to financially, or have an end goal in mind like leaving money for the next generation.


How much cash do I need?

Emergency fund rule of thumb: 3 to 6 months of living expenses.

That said, whatever makes you feel comfortable or gives you peace of mind, at least up to a point. The problem with sitting on too much cash is simply the opportunity cost. This is opportunity cost in missed returns from the stock or bond market, as well as inflation eating into your purchasing power. Inflation has averaged around 3% historically, so each year that goes by, your dollars are able to buy less and less. For example, $50,000 today will be worth $36,871 in 10 years at 3% inflation.

Let’s say you have $50,000 and want to buy a car in 18 months. Leave that money in cash. The time horizon, or use of the money, is too soon to risk it in the stock or bond market. The last thing you want to happen is for your money not to be available when you need it. Regarding an investment portfolio, cash positions can range from 0.50% to 5%, depending on who you ask. I’m fine with a smaller cash position, as you should have cash outside of your investment portfolio.

6. Beneficiary Check and Estate Planning

You need to periodically check your beneficiaries. A great time to do so is when you’re changing jobs and setting up your new work plan. Make sure you’re adding beneficiaries to your retirement accounts. This will ensure that the funds are going to the right people in the event you pass. They avoid having to go through the probate process with the court system and go directly to the beneficiaries on the account.

Primary and Contingent Beneficiaries

If you’re married, it usually makes the most sense to name your spouse as the primary beneficiary to receive 100% of the funds. A lot of times the plan will default to this or you will have to obtain a signature from your spouse if you prefer otherwise. Should a spouse inherit an IRA they will have multiple options regarding the treatment of the account from a titling and taxation standpoint.

If you’re single, think about who is important to you and who you would like to receive your money. Who would be the most responsible and not go out and spend it all? You can also split the beneficiaries between multiple people.

Contingent beneficiaries will receive the funds in the event the primary beneficiary pre-deceases them. An example would be, a spouse is listed as the primary beneficiary and passes away. The account owner ends up passing away shortly after. The four children are listed as contingent beneficiaries each receiving 25% of the IRA. A stretch IRA can be established in this situation where the beneficiary will take out distributions based on their life expectancy, instead of the deceased owner’s, resulting in more money staying in the account.

In the event that no one is named as beneficiary then the assets will go to your estate and the court will decide who gets your funds. This typically is the next of kin or whoever is closest to you in the family tree.

Estate Planning

This is also a good time to review your estate plan. Make sure your wills are up to date with the correct beneficiaries and that your assets are going to the right places. Also, you should have power of attorney’s named, both for health care and financial matter – A health care POA and durable POA.

  • Do testamentary trusts need to be set up for minors or children?
  • Do you have guardians named?
  • Who’s the executor or trustee? Does it make sense to add a co-trustee?
  • Do you need to make a list of personal property that you would like to leave to specific family members?
  • Do you need to set up a revocable living trust?
  • Do you have healthcare and durable power of attorneys in place? These allow the persons with POA to make healthcare decisions and financial decisions on your behalf should you become incapacitated.
  • A living will or advance care medical directive is a document where you state your medical wishes and a POA should abide by upon you incapacitation.


Do yourself a favor and get your financial house in order. It’ll make life much easier down the road and you’ll feel confident that you’re on track and taken care of financially. In summary:

  1. Review cash flow, budget, and taxes. Double check payroll, withholding, and retirement contributions.
  2. Review your employee benefits! Take advantage of what’s available to you from your employer.
  3. In conjunction with your employee benefits review:
    1. Medical savings accounts – HSA, HRA, & FSAs
    2. Insurance – Health, life, and disability
    3. Rollover old retirement plans into IRAs
    4. Review your investments as a single portfolio.
    5. Check and name your beneficiaries. Review your estate plan to make sure your wills, health care power of attorneys, durable power of attorneys, and living wills are up to date.

If you’d like an objective second opinion about your finances, please contact Michael Shea, a CERTIFIED FINANCIAL PLANNER at Applied Capital. Email him at [email protected]

This blog is provided for informational purposes only. Such views are subject to change at any point without notice. The information in the blog should not be considered investment or tax advice or a recommendation to buy or sell any types of securities. Some of our blogs or information therein have been obtained from third party sources believed to be reliable but such information is not guaranteed. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. No reliance should be placed on, and no guarantee should be assumed from, any such statements or forecasts when making any investment decision.

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