Smart Money Moves to consider for 2018


If you find yourself considering resolutions for the New Year, you are not alone.  From health and wellness to a full financial make-over, New Year’s resolutions are quite common.  While developing a list of resolutions may sound simple, the implementation can be more challenging.  In fact, according to a U.S. News and World Report survey, the average person setting a resolution has fallen off the horse by the middle of February.  The key to success is maintaining the motivation and commitment throughout the year – especially when it comes to financial resolutions.  While staying on track financially can be even more challenging than other resolutions, the rewards from staying on track can prove beneficial for years to come.

So, what are the most common resolutions? A survey from states that the five most important financial resolutions for 2018 are as follows:  Make & stick to a Budget –29.50%, Save for a large purchase such as a down payment, household upgrade, or car, etc. - 25.20%, Pay down credit card debt - 19.90%, Place money aside for an emergency fund - 15.50%, Save for retirement - 5.00%.

Rather than allowing financial procrastination to prevent you from pursuing your goals, why not consider establishing personal goals for the New Year that include addressing the following key areas.

Review your tax plan

The Tax Cuts and Jobs Act represents the most significant tax reform in over thirty years. With such significant changes taking effect, it is important to understand what the impact will be to you.  Are you expecting to pay less in taxes under the new plan or will you actually be paying more?  For taxpayers who expect to pay less, why not capture this additional discretionary income and earmark a portion toward building retirement savings, paying down debt or building an emergency reserve.  On the other hand, tax payers in higher tax burdened states such as New Jersey, New York and California may want to proactively review whether they will be responsible to pay more taxes under the plan.  Why should some residents there be concerned?  In particular, the new plan limits the state and local tax deduction to $10,000 for anyone who itemizes so those paying higher property and state income tax rates may not be able to itemize as much under the new plan.  It is critical to remember that everyone will be impacted differently and effective planning may help limit any tax surprises for 2018.

Rebalance your portfolio

We are in the midst of the 2nd longest economic expansion in history. While strong corporate profits, low unemployment and tax reform have led to continued optimism, the markets remain expensive by many metrics.  For example, price/cash flow, price/sales and various calculations of price/earnings all suggest market valuations are getting rich.  Specifically, lets examine the CAPE ratio or Shiller price to earnings (PE) ratio which, according to,  currently stands at 32 times earnings.   While valuation measures are generally not effective predictors of short-term movements in the market, they do highlight the importance of reviewing your portfolio to ensure that they are still properly allocated.

The primary goal of rebalancing is to bring the different investments that make up an investor’s portfolio back into proper alignment. As the markets fluctuate over time, the original target mix changes, altering the amount of risk in the portfolio. Unfortunately, many investors fail to properly rebalance over time. From rebalancing annually or semi-annually to reallocating when any piece of the portfolio deviates from the target by 5 percent or more, there are many approaches to rebalancing.

When determining your rebalancing strategy, be careful to review transaction fees and taxes. Keep in mind that capital gains or losses will be realized in nonretirement accounts, so speak to your tax advisor prior to making any adjustments. Remember, investing involves risk and rebalancing does not prevent investment losses. Instead, it is a means to keeping your portfolio balanced between the various asset classes selected.

Develop a cash reserve strategy

develop cash reserve strategy

Interest rates have been low for such an extended period of time that many savers have made the mistake of chasing returns and investing cash in higher risk investments or they have given up trying to earn any interest and have left reserves in low interest checking or savings.  The federal reserve recently raised interest rates a .25 percent and shared that they expect 3 more increases in 2018.  With interest rates creeping higher, the New Year is also a good time to re-visit the both the size of your emergency fund and how your cash reserves are invested. FDIC insured direct banks such as Ally Bank, CIT, Everbank and the like may offer higher rates of interest that may increase as the Fed raises rates over time. Additionally, setting up a laddered CD strategy using the direct banks noted above may help increase your yield over time as rates move higher. Consider visiting to see a list of institutions and rates.

 Review your estate plan

Estate planning is another commonly overlooked aspect of financial planning. The Tax Cuts and Jobs Act also essentially doubled the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples.  Additionally, many states are also adjusting their estate and inheritance taxes making it an important time to review your estate plan for 2018. For example, the state of New Jersey is phasing out their estate tax in 2018. (The inheritance tax remains in place in NJ.) As a result, consider meeting with your attorney to review your current estate planning documents including your will, living will, power of attorney and trusts. This may help ensure that your wishes are properly carried out and in alignment with your estate planning documents.

While financial resolutions may be difficult to stick to, maintaining a disciplined approach throughout the year may help as you pursue the goals most important to you.  Consider addressing the Smart Money Moves noted above and consider speaking to your tax, legal and financial adviser to determine the most appropriate approach for your unique circumstances.

Kurt J. Rossi, MBA, CFP®, CRPC®, AIF® is a CERTIFIED FINANCIAL PLANNERtm Practitioner & Wealth Advisor.  He can be reached for questions at 732-280-7550,, & LPL Financial Member FINRA/SIPC.