A lot can happen in the course of one year, and it usually does.
From your health to your income to the place you live, the likelihood of significant change is high. And as our situations change, we do too: Our priorities shift, and our goals evolve.
Because life isn’t static, your finances aren’t either. And that’s why an annual review is so important.
Annual reviews are a time to take stock of what’s happened over the past year, and to evaluate how it could affect your future. These reviews allow you to make the adjustments needed to stay on track toward achieving your long-term goals.
Your annual review should revisit key questions about your finances, including:
- Whether your spending, saving and investments are meeting the benchmarks laid out in your retirement plan. Remember: How you manage your income is one of the biggest predictors of your financial success. Having a plan is a great start, and if the markets do well that’s terrific – but none of it matters if your income isn’t going to the right places in the right amounts.
- Whether your forecast retirement income is still adequate to meet your needs. Retirement plans aren’t cast in stone: Any number of factors can prompt you to change your plan, including losing or gaining a spouse, deciding you want to relocate to be near the kids, or medical conditions that will require extra care.
- Whether your tax rates have changed, and whether certain strategies can be implemented to boost your after-tax returns. Taxes are the biggest single expense involved in investing. Practicing vigilance can help you keep them to a minimum.
- Whether your debt structure is most advantageous to you. By analyzing your debts, you can help ensure that debt is helping you achieve your goals rather than putting them at risk and out of reach.
- Whether you are properly protected with the appropriate insurance coverage. Unforeseen circumstances can derail the best-laid financial plans. Insurance can protect you against the unexpected, but only if it’s the right type and amount.
Other important areas to update include making sure your assets are properly titled and your beneficiary designations are updated. It’s also critical to make sure your estate plan is up to date, especially if there have been family changes such as marriage, divorce or new children.
It’s hard to overstate how short-term changes from year to year can impact your long-range goals over time. If an ocean liner is a couple of degrees off course, it can end its journey in the wrong country. But small corrections, made early on, can keep it on course toward its destination. And so it is with course corrections with your retirement plan.
If you would like help building an annual review into your efforts to manage your wealth, we may be able to help. At Intelligent Capitalworks, that’s just part of what we do.