The last several tumultuous years of America’s economy, with continually increasing inflation, has many people concerned for their financial futures. While inflation is reported to be stabilizing, it is still not a bad idea to enter 2024 with a solid financial plan. As such, we spoke with two of the area’s best and most experienced professional financial advisors and asked for their expert advice regarding good investment paths and ideas to implement in the new year.
Step by Step
Robert Alvarez boasts 23 years of experience as a professional financial advisor. Currently a financial advisor specializing in wealth management at NOLA Financial, Alvarez gave New Orleans Magazine some helpful tips to share with our readers regarding general ways to create a comprehensive financial plan.
“The first step in a prudent financial planning process is to sit down and actually review your financial goals,” advised Alvarez. “Whether you are single or married, clearly identifying what it is that you are interested in achieving financially should be your starting point. The most common goals that I assist people with include but are not limited to tax reduction strategies, estate planning, retirement income planning, investment planning, social security planning, education funding, protection, and insurance planning.
“Once you have determined what it is that you are interested in achieving, or concerned about possibly not being able to achieve, you will then be able to do a deeper dive,” said Alvarez. “If you have a family, you might be surprised how often you and your significant other are not aware of each other’s goals; you may have different goals, and in many instances this process may spark a healthy and necessary dialogue. At that point, most people find a great deal of benefit from visiting with a financial professional who specializes in comprehensive financial planning. The advisor is in a unique position to guide you through the ins and outs of the financial planning process. This third party can also help to create a safe environment where you and/or your significant other can feel free to be honest about your individual and collective feelings and priorities.
“In a typical financial planning process, the professional should establish your goals and then move on to the data gathering phase of the process. This will typically include information on what you may already be doing from a financial standpoint, and it may include gathering existing investment account information, workplace retirement plans and benefits information, insurance policies, educational savings plans, or estate planning items that you may already have.”
Assuming that you feel comfortable with the advisor, he or she should disclose the scope of any professional relationship that they might be proposing to you and inform you of any costs associated with continuation of the process.
“The remaining steps of the process would include having the advisor create an actual written financial plan for you which considers multiple factors,” Alvarez added. “At a basic level, those factors should include your goals, your mutual objectives, risk tolerance, your age, time horizon, where you are presently with each goal, where you want to go financially, and how best to get you there.
“Upon completion of your written financial plan, the advisor should meet with you and discuss the results of that financial plan and walk you through different options on how to best achieve your goals. Once you understand the recommendations and alternative solutions, you should be able to expect your advisor to help you with actual implementation of those strategies.
“Once the process has commenced, you should establish, along with your advisor, a regular review schedule. This is an extremely important part of the process and has a great deal to do with your long-term success. Obviously, changes will occur for you, and in the ever-fluctuating economy in general. By maintaining a regular review schedule and ongoing relationship with your advisor, you tend to maximize your chances for success and in the end be happier with your advisory relationship in general.”
Alvarez concluded, “If there is one thing that you can do to maximize your chances for financial success this year, consider getting or updating your existing financial plan under the guidance of a qualified financial professional.”
A Specific Plan
Ted Longo, President, Senior Wealth Management Advisor at his firm, The Longo Group added some more precise advice regarding financial planning, savings, and investments for our readers desiring to up their financial game in 2024
“In terms of retirement plans,” began Longo, “401k contributions are going up to a maximum of $23,000 with the catch-up provision for people 50 and above remaining at an additional $7,500. If you can afford to do so, max out your 401ks, as there is no better savings tool. At a minimum, if it fits in your budget, you should meet the match amount offered by your employer. The match equates to a 100% return on your money before investment. So, if possible, you want to take advantage of this. For business owners and people employed as contractors, there are options available including plans like SEPs and Individual 401ks. When properly used, these are worth looking at for all the same advantages that a retirement plan can bring. IRA contributions are going up to a maximum of $7,000 in 2024 if you are under the age of 50. If you are 50 or older, you can contribute up to $8,000, which offers a $1,000 catch-up provision.
“For educational planning,” Longo continued, “the 529s are still an excellent way to go. 529s impose no income limits, are easy to open and maintain, their growth is tax deferred, and withdrawals are tax-free if used for educational purposes. There are also flexible options in case the child does not ultimately use the money for education.
“If you are charitably-oriented, then make sure to also plan your gifting. For those who have already started taking required minimum distributions from their retirement accounts, those can be given directly to a charity, which avoids the entire tax issue on the withdrawal. If you are fortunate enough to have appreciated securities, those are wonderful gifts to tax-exempt organizations because those organizations can then turn around and sell the securities, avoid taxes, and you get your deduction.
“Finally, if you have not had the opportunity to look into donor-advised funds, they are excellent gifting-planning tools due to their flexibility and the control you maintain over the account.”
Longo added, “Regarding any outstanding debts/loan: if variable rates are involved, this is a good time to see what you are currently paying for those dollars. Interest rates have gone up tremendously since the beginning of 2022 and many people are unaware of what they are paying for interest on their credit cards or other lines of credit. It may be worth checking these and trying to find more favorable rates.
“Lastly, plan your spending. Obviously you do not want to spend more than you can afford to, but how much is that? The beginning of each year is a good time to sit down and figure out what your spending can be for the year. It’s comforting not to spend too much but if there are things you want to do in life, there’s no reason to under-spend either. Money is meant to be enjoyed and it can add a lot to life if used properly.”
Longo then moved on to savings and investments: “The easiest thing to do for the start of 2024 is to check and see what your savings balances are earning, return-wise. I mentioned earlier that interest rates have increased since the beginning of 2022. With that said, the average savings and checking account in the US is paying less than one-percent. With little or no risk, you can get higher rates by utilizing money markets, certificates of deposits (CDs), and treasuries. On short-term CDs (one year or less) you can still get a five-percent interest rate–not bad for a Federally-insured savings vehicle.”
“Also, make sure you have a disciplined investment process and that the risk level of that process matches your needs and temperament. The stock market again proved in 2023 why there’s no reason to try and time it. Many of the so-called experts have been calling for a recession for the last two years. I’m not saying one is not out there, but so far one hasn’t shown up and the market is hitting new highs. Those new highs however are being driven by just a handful of very large companies’ stocks. Wall Street nick-named them the Magnificent Seven (Apple, Microsoft, Alphabet, Amazon, Nvidia Corp, Tesla, and Meta Platforms) and they are all concentrated in one area of the market. With other areas of the market not performing as well and trading at more attractive values, this is a great time to rebalance your portfolios if they are overweighted in one area. But again, all of this is part of a disciplined investment process that should meet your needs and personality.
“Lastly, regarding portfolios, it’s been many years since fixed income investments have paid the yields they currently are with the ability to get five-percent or more on bonds and still be able to stay high-quality. It’s a good time to review that part of your portfolio as well. On a total return basis, bonds had an awful year in 2022 thanks to the inverse relationship of interest rates and bond prices. Ultimately what this means is that bonds have become more attractive in price and yield. That still doesn’t mean that a smart strategy shouldn’t be put in place, but it does mean that it will contribute more to the total return of your portfolio right now.”
While the current financial climate may intimidate some, if you take the advice of these experts, it should create more monetary stability in 2024, better peace of mind, and an overall higher quality of life for you and your loved ones.
