Screenshot of Sum180 website

The end of the year is a good time to update your financial plan — or to create one if you don’t already have one, a local financial planner advises.

Carla Dearing, CEO of Sum180, an online financial planning service geared toward women, says simply sitting down to create a financial plan “will give you a clear sense of your financial situation.” And it will put you “in a stronger position to make adjustments in 2017.”

Sum180 is a project of IMC Partnerships, a Louisville-based team of serial entrepreneurs. The company says it provides customized, easily understood planning advice so that people can meet their financial goals, whether they want to simply learn how to better deal with their money or meet specific goals, such as saving enough money to send their children to college.

To obtain personalized advice, customers must provide detailed personal information in an online interview about their income, expenses, debt, savings, retirement savings and more. Within seven days after submitting the information, customers receive an action plan.

Carla Dearing

The plans are based on the expertise of financial advisers from Comprehensive Planners. A subscription to the service costs $129 per year and provides access to additional phone consultation for $99 per half hour. At $199 per year, customers get a half hour of phone consultation included. Sum180 also provides the service to employers, which offer the planning advice as part of their wellness program.

Plans include what customers are doing right, listing key accomplishments, such as having 100 percent of one’s cash reserve goal or not holding any of the debts that often create problems for people. The key for improvement, Dearing said, is the three steps the plan advises customers to take. Once the customer completes a step, the list is replenished.

Steps may include starting to fund a 401(k) plan with a specific annual amount, based on the customer’s financial situation. Or it may be to increase savings for college, again by a specific amount.

The plan provides details for each step. For college savings, for example, the plan would list the amount the customer already has saved, the total expected college expense for her children, the amount she’s contributing annually, the additional amount she should be contributing and ways to save for the expected expenses. The plan also would provide a table that shows in which year she’d be expected to pay what amount for each child.

Dearing said the plans often first advise customers to eliminate their credit card debt, and will provide a specific monthly dollar amount and a projection as to when the debt is paid in full. Credit card debt often undermines financial stability because of its high interest rate.

For example, to pay off a credit card debt of $10,000 within 36 months, the borrower has to pay at least $372 per month and would end up paying nearly $3,400 in interest. At a 2 percent interest rate, such as a typical car loan, the same $10,000 debt would require interest of only $240.

End-of-year to-do list

Dearing wrote in a recent blog post that many end-of-year financial to-do lists provide advice that do not mean a lot for the average consumer. Nonetheless, the end of the year can provide an opportunity to hit the reset button. Dearing suggests people focus on the following three steps:

  • Create a financial plan or, if you already have one, update it.
  • Determine your most important next steps and commit to taking them next year. “Think of this as the year-end financial equivalent of clearing your desk and writing your next day’s to-dos before heading home at the end of the workday.”
  • Consider whether you could downsize in some areas of your life. Possible steps can include moving into a smaller home, which would mean a smaller mortgage, or it could mean buying a smaller car or reducing entertainment expenses.

Sum180 also provides a short weekly webcast with financial tips. A recent one advised that people spend no more than 1.5 percent of their income on holiday expenses. For a household with an income of $50,000, that’s $750. Sum180 also said that it was OK to borrow from one’s emergency fund (which should hold six months worth of expenses) — but to make it is replenished it after the holidays.

Dearing worked for 15 years in finance before she took over as CEO of IMC about five years ago. She said that while Sum180 offers services to everyone, it targets especially women, because they have traditionally been underserved in financial planning. Sum180 was created based on insights from its sister company Vibrant Nation.

The financial industry often conveys information in language — wealth management, winning the investment game, having high returns — that does not address how women often think about finances, Dearing said. Many women think about money from a security perspective: Do I have enough for right now? To achieve my short- and long-term goals?

Americans in general aren’t saving enough for emergencies or for retirement, according to financial experts. Excluding equity they’ve built in their homes, Americans ages 35 to 44 have an average net worth of about $14,000. For people aged 55 to 64, the figure is about $45,500, according to SmartAsset. And about half of U.S. households have no retirement account.

“In fact,” SmartAsset wrote, “according to the Government Accountability Office, around 29 percent of households age 55 and older have neither retirement savings nor a pension. It doesn’t paint a pretty picture. ”

Dearing said that while many people in their 50s have not saved nearly enough for retirement, they can step up their retirement savings at any time. People at that age generally have reached their prime earning years, plus their children have left the home, which means they can live in a smaller house, with a smaller mortgage.

She also advised that people not fall for advertisements that try to sell people on a retirement sitting in Adirondack chairs at a lake in New England. For most people, 80 percent of retirement will look a lot like their life before retirement, which means that it likely will include some work.

“And actually, it’s not so bad,” Dearing said.

Disclosure: Sum180 co-founder Stephen Reily is an investor in Insider Louisville.

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