It's Time for Your Annual Financial Checkup

Reviewed Apr 17, 2017

Close

E-mail Article

Complete form to e-mail article…

Required fields are denoted by an asterisk (*) adjacent to the label.

Separate multiple recipients with a comma

Close

Sign-Up For Newsletters

Complete this form to sign-up for newsletters…

Required fields are denoted by an asterisk (*) adjacent to the label.

 

Summary

  • Review your cash flow.
  • Review and rebalance your investments.
  • Review your will and your insurance.

You’re another year older, but do you really know if you’re getting richer or poorer? Should you make any changes in the way you save, spend and invest your money? To answer such questions as these, it’s a good idea to regularly review your financial health.
 
This doesn’t have to be done just after the stroke of midnight on New Year’s Day. And sometimes you shouldn’t wait for the new year to review certain aspects of your finances that can change because of life events. For example, it’s important to review your life insurance coverage when you have a child on the way, whatever the date or season. And when you’re measuring your progress toward retirement goals, your birthday may be a more fitting time to take stock.
 
But there's a certain logic to reviewing your finances at the start of the calendar year. For one thing, you pay your income taxes on a calendar-year basis, so going over income and expenses at this time is a good way to get a head start on the tax-filing process. Also, the end-of-year pay stubs give you a quick snapshot not only of the past year's income but also the taxes you paid. Finally, you may be more in the mood for personal reassessment and the making of resolutions. Financial checkups are in the spirit of the season. “The beginning of the year is a good time to look back to ‘where I’ve been and where I’m going’," says Clark Randall, a Dallas, Texas-based financial planner.
 
Here are some areas that planners suggest you include in your yearly review.
 
Review your cash flow
 
Look at your checkbook balance for January 1 and compare it to where it was at this time last year. Is it higher or lower? Do you know where all the money has gone? It’s never a bad time to start addressing these questions, and the start of the year is as good as any.

If you’re already tracking and categorizing your expenses, good for you. You should now be able to add things up and get a picture of your spending habits. If you’ve already made a budget, better still. You can see if you’ve stayed within your budgeted amounts.

Using your latest pay stubs, you should be able to tell how much money you took home after taxes in the past year, and if this is more or less than what you spend. If it’s more, you’re saving. If it’s less, you need to find out why. Unless you had an extraordinary expense (something that doesn’t happen every year, like a down payment on a house or car), then you need to take another look at your spending and figure out what to cut.
 
Review (and rebalance) your investments
 
If you’ve done your homework and defined your investment goals, such as retirement and college, you should check regularly to see if you’re still on track to reach them. The start of a new year is a good time to take stock of your stocks and bonds—to see which investments have done well or poorly in the past year, and to make adjustments. If you have a 401(k) or other employer-based retirement plan that gives you several investment options, you may want to change the mix at this point.
 
Deciding exactly what to adjust is something of a judgment call. Generally, experts say you should try to maintain a mix of stocks and bonds (or stock and bond mutual funds) that fits your long-term strategy. If at this point you’ve planned to have 70 percent in stocks and 30 percent in bonds (or money-market funds), you should “rebalance” your portfolio if it has strayed from those proportions in the past year. If the stock (or “equity”) part of your portfolio has shrunk, you should shift money to stocks. In effect, this means doing what does not come naturally to most investors: selling winners and buying last year’s losers.
 
“Holding on to winners may be very tempting,” says Ernie Ankrim, director of portfolio strategy for the investment research firm Frank Russell Co., “but it can chip away at your portfolio’s diversification over time.”
 
For investments in taxable accounts, remember that any sales can create capital gains that may result in a tax bill next year. But you also can sell securities that have lost money and use the loss to cancel out the taxable gains. Most investors carry out such tax strategies later in the year, but it never hurts to plan ahead.
 
Make sure you’re prepared for the worst
 
The bittersweet passage of another year brings up issues that you usually keep on a mental back-burner—like the question of what happens after you’re gone. Randall suggests reading your will regularly—“maybe on a cursory basis every year,” and more carefully every few years—to make sure it still reflects your wishes. Regardless of the calendar, he says you should review your will whenever you’ve been through a major life-changing event or a significant change has been made in the tax laws.
 
You also should review your insurance, making sure that you have adequate life and disability coverage. If you haven’t done so already, check with your employer’s human resource department to see what coverage you already have.

Resource
 
The Motley Fool
www.fool.com
Use the search function to find Robert Brokamp’s article “Your Financial Checkup” (free registration required).

By Tom Gray
Source: Clark Randall, CFP, financial planner, Lincoln Financial Advisors, Dallas, Texas; Frank Russell Co.; The Motley Fool

Summary

  • Review your cash flow.
  • Review and rebalance your investments.
  • Review your will and your insurance.

You’re another year older, but do you really know if you’re getting richer or poorer? Should you make any changes in the way you save, spend and invest your money? To answer such questions as these, it’s a good idea to regularly review your financial health.
 
This doesn’t have to be done just after the stroke of midnight on New Year’s Day. And sometimes you shouldn’t wait for the new year to review certain aspects of your finances that can change because of life events. For example, it’s important to review your life insurance coverage when you have a child on the way, whatever the date or season. And when you’re measuring your progress toward retirement goals, your birthday may be a more fitting time to take stock.
 
But there's a certain logic to reviewing your finances at the start of the calendar year. For one thing, you pay your income taxes on a calendar-year basis, so going over income and expenses at this time is a good way to get a head start on the tax-filing process. Also, the end-of-year pay stubs give you a quick snapshot not only of the past year's income but also the taxes you paid. Finally, you may be more in the mood for personal reassessment and the making of resolutions. Financial checkups are in the spirit of the season. “The beginning of the year is a good time to look back to ‘where I’ve been and where I’m going’," says Clark Randall, a Dallas, Texas-based financial planner.
 
Here are some areas that planners suggest you include in your yearly review.
 
Review your cash flow
 
Look at your checkbook balance for January 1 and compare it to where it was at this time last year. Is it higher or lower? Do you know where all the money has gone? It’s never a bad time to start addressing these questions, and the start of the year is as good as any.

If you’re already tracking and categorizing your expenses, good for you. You should now be able to add things up and get a picture of your spending habits. If you’ve already made a budget, better still. You can see if you’ve stayed within your budgeted amounts.

Using your latest pay stubs, you should be able to tell how much money you took home after taxes in the past year, and if this is more or less than what you spend. If it’s more, you’re saving. If it’s less, you need to find out why. Unless you had an extraordinary expense (something that doesn’t happen every year, like a down payment on a house or car), then you need to take another look at your spending and figure out what to cut.
 
Review (and rebalance) your investments
 
If you’ve done your homework and defined your investment goals, such as retirement and college, you should check regularly to see if you’re still on track to reach them. The start of a new year is a good time to take stock of your stocks and bonds—to see which investments have done well or poorly in the past year, and to make adjustments. If you have a 401(k) or other employer-based retirement plan that gives you several investment options, you may want to change the mix at this point.
 
Deciding exactly what to adjust is something of a judgment call. Generally, experts say you should try to maintain a mix of stocks and bonds (or stock and bond mutual funds) that fits your long-term strategy. If at this point you’ve planned to have 70 percent in stocks and 30 percent in bonds (or money-market funds), you should “rebalance” your portfolio if it has strayed from those proportions in the past year. If the stock (or “equity”) part of your portfolio has shrunk, you should shift money to stocks. In effect, this means doing what does not come naturally to most investors: selling winners and buying last year’s losers.
 
“Holding on to winners may be very tempting,” says Ernie Ankrim, director of portfolio strategy for the investment research firm Frank Russell Co., “but it can chip away at your portfolio’s diversification over time.”
 
For investments in taxable accounts, remember that any sales can create capital gains that may result in a tax bill next year. But you also can sell securities that have lost money and use the loss to cancel out the taxable gains. Most investors carry out such tax strategies later in the year, but it never hurts to plan ahead.
 
Make sure you’re prepared for the worst
 
The bittersweet passage of another year brings up issues that you usually keep on a mental back-burner—like the question of what happens after you’re gone. Randall suggests reading your will regularly—“maybe on a cursory basis every year,” and more carefully every few years—to make sure it still reflects your wishes. Regardless of the calendar, he says you should review your will whenever you’ve been through a major life-changing event or a significant change has been made in the tax laws.
 
You also should review your insurance, making sure that you have adequate life and disability coverage. If you haven’t done so already, check with your employer’s human resource department to see what coverage you already have.

Resource
 
The Motley Fool
www.fool.com
Use the search function to find Robert Brokamp’s article “Your Financial Checkup” (free registration required).

By Tom Gray
Source: Clark Randall, CFP, financial planner, Lincoln Financial Advisors, Dallas, Texas; Frank Russell Co.; The Motley Fool

Summary

  • Review your cash flow.
  • Review and rebalance your investments.
  • Review your will and your insurance.

You’re another year older, but do you really know if you’re getting richer or poorer? Should you make any changes in the way you save, spend and invest your money? To answer such questions as these, it’s a good idea to regularly review your financial health.
 
This doesn’t have to be done just after the stroke of midnight on New Year’s Day. And sometimes you shouldn’t wait for the new year to review certain aspects of your finances that can change because of life events. For example, it’s important to review your life insurance coverage when you have a child on the way, whatever the date or season. And when you’re measuring your progress toward retirement goals, your birthday may be a more fitting time to take stock.
 
But there's a certain logic to reviewing your finances at the start of the calendar year. For one thing, you pay your income taxes on a calendar-year basis, so going over income and expenses at this time is a good way to get a head start on the tax-filing process. Also, the end-of-year pay stubs give you a quick snapshot not only of the past year's income but also the taxes you paid. Finally, you may be more in the mood for personal reassessment and the making of resolutions. Financial checkups are in the spirit of the season. “The beginning of the year is a good time to look back to ‘where I’ve been and where I’m going’," says Clark Randall, a Dallas, Texas-based financial planner.
 
Here are some areas that planners suggest you include in your yearly review.
 
Review your cash flow
 
Look at your checkbook balance for January 1 and compare it to where it was at this time last year. Is it higher or lower? Do you know where all the money has gone? It’s never a bad time to start addressing these questions, and the start of the year is as good as any.

If you’re already tracking and categorizing your expenses, good for you. You should now be able to add things up and get a picture of your spending habits. If you’ve already made a budget, better still. You can see if you’ve stayed within your budgeted amounts.

Using your latest pay stubs, you should be able to tell how much money you took home after taxes in the past year, and if this is more or less than what you spend. If it’s more, you’re saving. If it’s less, you need to find out why. Unless you had an extraordinary expense (something that doesn’t happen every year, like a down payment on a house or car), then you need to take another look at your spending and figure out what to cut.
 
Review (and rebalance) your investments
 
If you’ve done your homework and defined your investment goals, such as retirement and college, you should check regularly to see if you’re still on track to reach them. The start of a new year is a good time to take stock of your stocks and bonds—to see which investments have done well or poorly in the past year, and to make adjustments. If you have a 401(k) or other employer-based retirement plan that gives you several investment options, you may want to change the mix at this point.
 
Deciding exactly what to adjust is something of a judgment call. Generally, experts say you should try to maintain a mix of stocks and bonds (or stock and bond mutual funds) that fits your long-term strategy. If at this point you’ve planned to have 70 percent in stocks and 30 percent in bonds (or money-market funds), you should “rebalance” your portfolio if it has strayed from those proportions in the past year. If the stock (or “equity”) part of your portfolio has shrunk, you should shift money to stocks. In effect, this means doing what does not come naturally to most investors: selling winners and buying last year’s losers.
 
“Holding on to winners may be very tempting,” says Ernie Ankrim, director of portfolio strategy for the investment research firm Frank Russell Co., “but it can chip away at your portfolio’s diversification over time.”
 
For investments in taxable accounts, remember that any sales can create capital gains that may result in a tax bill next year. But you also can sell securities that have lost money and use the loss to cancel out the taxable gains. Most investors carry out such tax strategies later in the year, but it never hurts to plan ahead.
 
Make sure you’re prepared for the worst
 
The bittersweet passage of another year brings up issues that you usually keep on a mental back-burner—like the question of what happens after you’re gone. Randall suggests reading your will regularly—“maybe on a cursory basis every year,” and more carefully every few years—to make sure it still reflects your wishes. Regardless of the calendar, he says you should review your will whenever you’ve been through a major life-changing event or a significant change has been made in the tax laws.
 
You also should review your insurance, making sure that you have adequate life and disability coverage. If you haven’t done so already, check with your employer’s human resource department to see what coverage you already have.

Resource
 
The Motley Fool
www.fool.com
Use the search function to find Robert Brokamp’s article “Your Financial Checkup” (free registration required).

By Tom Gray
Source: Clark Randall, CFP, financial planner, Lincoln Financial Advisors, Dallas, Texas; Frank Russell Co.; The Motley Fool

The information provided on the Achieve Solutions site, including, but not limited to, articles, quizzes, and other general information, is for informational purposes only and should not be treated as medical, health care, psychiatric, psychological or behavioral health care advice. Nothing contained on the Achieve Solutions site is intended to be used for medical diagnosis or treatment or as a substitute for consultation with a qualified health care professional. Please direct questions regarding the operation of the Achieve Solutions site to Web Feedback. If you have concerns about your health, please contact your health care provider.  ©2017 Beacon Health Options, Inc.

 

Close

  • Useful Tools

    Select a tool below

© 2017 Beacon Health Options, Inc.