As we approach the holiday season, we are reminded that the end of the year is rapidly approaching and that now is a good time to review our financial situations.
In my opinion, one of the most important steps in the financial planning process is the monitoring of your financial plan. Unfortunately, it seems that this step is the one most often overlooked. I believe an annual financial review should be as important as your annual physical exam or the annual service on your car.
It is always a good idea to do your annual financial “check-up” before the end of the year so you can decide to take advantage of tax-savings strategies, such as whether to take gains or harvest losses as well as make important retirement account decisions.
The annual review is important for several reasons. First of all, it gives you an opportunity to measure the progress toward your plan of action. It also gives you an opportunity to examine the many changes that have happened in your life over the last 12 months. It is during an annual review that we will either reaffirm a client’s progress toward their personal financial goals or readjust their plan to hopefully better reach their goals.There are a lot of potential objectives to cover during an annual review. These objectives should be considered in the context of each individual’s situation and should be evaluated and prioritized as to what’s important. Potential annual review objectives include:
Identify/Reaffirm Your Goals
Have you made progress toward your financial goals this year? If not, where have you fallen short? If your goals have changed, we need to revise them.
Evaluate Changes in your Personal Situation
What changes in your personal situation have occurred in the past year? Do you anticipate any major changes in the future? You may need to adapt your goals due to a job change, divorce, having a child, buying a home, retiring, getting married, losing a spouse, etc. These events can alter your spending and savings.
Protect Your Assets
Review your homeowner’s insurance, health insurance, and auto insurance policies to make sure you have adequate coverage. This is a good time to review the need for disability or Long Term Care insurance as well.
Prepare for the Unexpected
Review your will and/or Estate plan. Has anything changed that would require an update?
Evaluate Investment Performance
Calculate the return on each of your accounts. Compare the returns to their respective benchmarks. Are the returns meeting your objectives? If not make any adjustments to assure that you are on track. Be sure your asset allocation reflects your time-horizon and risk tolerance.
In summary, annual reviews give us a chance to examine our total financial picture. With the current state of our economy and all of life’s uncertainties I think that it is now more important than ever to monitor your current financial situation at least annually.
Securities and investment advisory services offered through Financial Network Investment Corporation, Member SIPC. Founders Federal Credit Union and Financial Network are not affiliated. Investment Services is a department of Founders Federal Credit Union.
Not NCUA Insured - Not a Deposit - May Lose Value - No Credit Union Guarantee - Not insured by any Federal Government Agency.
This article was written by David Tolson with Founders Investment Services Team.