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Experts' Guide to Smart Financial Moves

With the end of the year looming, it’s a good idea to review your financial situation to prepare for tax filing, find out if you’re on track to meet your goals and discover if your investment portfolio still makes sense for your current lifestyle.

In order to lessen your tax liability, most financial experts will advise you to max out your retirement contributions every year, or if that’s not possible, to try to contribute at least as much as your company matches. And, if your company does not offer a retirement plan, set one up on your own and contribute to it. This can be a great benefit when filing taxes and also provides financial security in your retirement years.

Another smart financial move to make by the end of the year is to donate to 501(c)(3) charitable organizations that support causes you believe in. This decision may not only help you during tax time, it will also make you feel good all year.  

In addition to these common tax strategies, there are many other things you can do today and in the future to foster long-term financial health. Here, we consulted two financial experts at Montecito Bank & Trust to share their financial expertise on how to maximize funds.

“This year is an unusual year,” says Lisa Harwood, senior portfolio manager with Montecito Bank & Trust. “We've had many years of rising markets, but this year has been challenging. However, there's still going to be clients who have a lot of unrealized gains in their portfolios, while others will have short-term unrealized losses that they've generated over the course of the year. They might want to consider the value of harvesting some of those losses for use against future capital gains.”

Figuring out the right financial moves can be complicated, so it’s critical to have an expert to guide you on the right path.

“My advice is for people to set up a meeting with their financial professionals in the beginning of each year so that they can review what happened in the prior year and review their goals and risk tolerances, and make sure either that things are the same, or if they've changed, how that might impact what we're doing in their portfolio.”

The most important reason for consulting a professional, says Albert Chu, also a senior portfolio manager at Montecito Bank & Trust, is to take the emotion out of decisions and have an objective person who can provide structure and discipline.

“Ultimately, it comes down to somebody reviewing your situation and letting you know that you're going to be okay. You need somebody to be on top of that because you have your own job, your own family and other responsibilities.”

Adds Lisa: “Markets have been a challenge, as I mentioned, and I've been telling my clients along the way that you're relying on me for discipline because when markets get choppy, we've seen people say, ‘Oh my God, I'm on the ledge and I'm ready to jump!’

“It's our job to talk them off the ledge, and to say, ‘We've created a great financial strategy for you and unless something fundamental in your life has changed, it doesn't make sense for us to jump. We need to stick to our plan.’”

Some of the benefits of working with a community bank like Montecito Bank & Trust is that the experts who are guiding you really know you, your goals, your investment personality and your lifestyle.

“At many larger banks, wealth management is kind of an afterthought, and that feeling gets passed down to clients, but at Montecito Bank & Trust, we are very committed to the wealth management business as a really vital part of the overall bank,” says Lisa. “That shows through to how we work with clients and the success that we want to foster with clients.”

Adds Albert. “It all comes down to people and relationships with a community bank. You're always dealing with an actual person with regular communications. You always have someone local you can go to, and you don't feel like you're being shifted off to a call center far away.”

Every client at Montecito Bank & Trust has a portfolio manager, a trust officer and an investment analyst.

“Those are real people assigned to the client that the client can call and talk to, and each of those people knows the client’s situation,” says Lisa.

These experts can also personalize your investments to align with your values.

“That may be something like climate change or social justice,” says Albert. “So these are considerations that we can build into the portfolio.”

Explains Lisa, “At Montecito Bank & Trust, we very much tailor portfolios to clients’ needs and are thoughtful about what the client wants to do and how they want to do it. That's part of our initial conversation and ongoing conversations with clients.”

Being a local bank also means they welcome working with already established CPAs and attorneys of their clients. 

“When a client comes to us with an established team, we work with them and make sure that we're all on the same page and they get the information they need from us,” says Lisa. “We have an open dialogue so that we can actually be helpful to the client in terms of communications.”

Adds Albert, “As a community bank, we're not in competition with our clients’ teams of external financial professionals.” Also, if a client is in need of these professionals, they are also able to make recommendations to others in the area.

These experts can oversee the big picture while also paying attention to the small details, and there are also some practical things you can do on your own.

“Take a look at your budget,” says Albert. “Revisit and review it to understand if it worked, or if it needs to be adjusted. Which ultimately means, ‘Will that impact my cash flow and do I need to adjust my financial plan going forward?’”

Budgeting can be as simple as writing everything down on paper, inputting it into an Excel spreadsheet, or using free software such as Mint.com.

“It’s an account aggregator and it pulls in everything from your bank accounts to your credit cards and mortgage statements, so you get a balance sheet,” he says. “What it also does is lets you see what you've spent on certain categories.” Once you have this information, you may need to make some changes to your budget.

It’s also critical to review beneficiary designations.

“These designations supersede anything that you put in your will, so you want to revisit your insurance plans, your pensions, and your 401ks and have a look at who you designated,” says Albert.

It’s also important to set up a trust, which is not just for the wealthy.

“You don't have to have millions of dollars to benefit from having a trust,” says Lisa. “If you don’t have a trust and only have a will, your assets are subject to probate and probate is a very expensive public process that could be avoided by creating a revocable trust. It's worth the investment of creating a trust and making sure that your accounts and your real estate are titled in the name of that trust. We can help clients with that by referring them to a great estate planning attorney.”

While many couples find it hard to discuss finances, it’s a conversation that should take place on a regular basis. Albert recommends putting aside some time to speak with your partner to discuss this topic at least once a year.

“Do a personal review of what your goals and what your dreams might be so that you are aligned” he advises.

To avoid even more stress when it comes to tax time, stay organized throughout the year.

“It can be setting up envelopes where you keep your receipts or signing up for some type of software to track your receipts,” he says.

Since financial strategies and tax preparation can vary greatly depending on an individual’s income, tax bracket, assets and other factors, there’s no one solution that fits all. That’s why having your own financial expert can save money and avoid costly mistakes when it comes to drafting a smart financial plan now and in the future.

Developing a long-term personal relationship with an expert will also allow you to ensure that your plan is adjusted as major changes take place in your life. This way, you’ll always know that the plan you have in place is the right one at the right time.

To find out more about Montecito Bank & Trust and how its financial experts can assist you, visit Montecito.bank/wealth.

This information is not meant as a guide to investing, or as a source of specific investment recommendations, and Montecito Bank & Trust makes no implied or express recommendations concerning the manner in which any individual’s accounts should or would be handled, as appropriate investment decisions depend upon the individual’s investment objectives. The information is general in nature and is not intended to be, and should not be construed as, legal or tax advice. In addition, the information is subject to change and, although based upon information that Montecito Bank & Trust considered reliable, is not guaranteed as to accuracy or completeness. Montecito Bank & trust makes no warranties with regard to the information or results obtain by its use and disclaims any liability out of your use of, or reliance on, this information.

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