GET YOUR FINANCIAL DUCKS IN A ROW
03/14/2025 10:24AM ● By JENNIFER KRAUSE
As tax season approaches, we at Davis & Hodgdon Advisory Group recommend doing an annual review of your personal finances.We consider it the key to proactive tax strategizing and allowing you to reach your long-term goals, and the process doesn’t have to be overwhelming. Here’s how to start:
CREATE A FINANCIAL CHECKLIST
Our firm used client feedback to create a 5-step checklist with tasks to address each year.
STEP 1: Consolidate your 401(k) and IRA retirement plans from previous employers: This has a direct impact on tax and expense considerations, so consolidating your accounts instantly improves your finances.
STEP 2: Review investment allocation: Are your investments well diversified? Consider whether your target allocation is still appropriate for your goals and time horizon.
STEP 3: Review all insurance policies: Homeowners/renters, auto, life, umbrella, disability, etc. Do you have too little coverage— or too much?
STEP 4: Review estate planning documents and see what’s missing: At a minimum, you should have an advance directive, will, and medical and financial powers of attorney in place.
STEP 5: Consider tax strategies throughout 2025: Inflation adjustments to tax brackets can mean more in your paycheck in 2025, so monitor your federal and state withholdings to avoid a tax bill. This is especially critical during major income or life changes. If you withhold too much, you can expect a refund, but if you don’t withhold enough, you could end up owing money come tax time.
ALSO KEEP IN MIND
Beginning in 2025, some contribution limits to retirement accounts like 401(k), IRA, and Roth IRA have increased, providing an opportunity to maximize your contributions and reduce your taxable income.
You should also watch for updates to tax laws, especially as some provisions from the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025 unless extended by Congress. This could impact standard deductions, personal exemptions, and tax rates.
DEFINE YOUR FINANCIAL PRIORITIES
Financial goals should align with what matters
most to you, and this can change from year
to year. Here are some examples of common
goals we see clients set:
Build an Emergency Fund — Aim to save three to six months’ worth of living expenses in case of unforeseen circumstances, such as a medical emergency or job loss.
Debt Reduction — Pay down high-interest debts, such as credit card balances or loans, and create a strategy for reducing student loans or mortgage debt.
Home Ownership —I f buying a house is in your near future, start saving for your down payment.
Retirement Planning — Contribute to retirement accounts such as 401(k)s or IRAs to help ensure you can live comfortably later in life. If you are already retired, ensure that you are using the most appropriate, tax-savvy distribution strategy.
Education Funding — Set clear, achievable targets if you’re saving for your child’s college fund or your own education.
FOR MORE INFORMATION
Davis & Hodgdon Advisory Group assists individuals and businesses throughout Vermont and New England. D&H offers tax planning, financial and investment planning, and client accounting services. You can reach out to the firm to talk with a tax professional who can help you create a strategy to fit your specific needs.
