As we look back, it’s important to bear in mind that a single year provides a limited perspective of our financial lives. Did we do a little better financially in 2014 than we did in 2013? And if we did, what is the overall significance of that fact?
The key to putting any year in perspective is to see it through lens of a long-term financial plan. Your financial plan defines your destination, so that you can gauge your progress toward your goals.
One fact is clear: As 2014 winds down, we are all a year closer to our destination. Over the past 12 months, have you hewed to the correct course? Have you made sure that your financial ship is sound? If you are like many people, you may have done well in some areas but neglected others.
You may have increased your retirement contributions, for instance, but put off a review of whether you have enough insurance. Or you may be pleased with your investment returns, but be secretly disappointed that you still don’t have a complete estate plan in place.
The new year is a perfect opportunity to review your financial plan ‒ or if need be, to create one – and make sure you’re following through on the action steps. It’s a chance to understand whether you are saving enough to reach your goals. Your rate of savings, after all, far outweighs investment returns in determining whether you’ll retire well, help your kids pay for college or leave a meaningful legacy.
It’s important to review your investments as well, to determine whether your portfolio can reasonably be expected to meet your needs and your comfort level with risk.
And while few people consider insurance exciting, bear in mind that unexpected twists of fate can turn your plans for the future upside down. The proper amount of insurance can help protect the wealth that you’ve worked so hard to accumulate.
Finally, the start of a new year should serve as a reminder to create or update your estate plan documents. Everyone needs an estate plan, especially while you are still alive, but unable to attend to your affairs. Without one, others [even outsiders] may end up in control of deciding the answers to major questions in your life, such as who will care for your children, what kind of care you will receive and who will manage your affairs and receive your assets.
It may not be pleasant to plan for a future in which you aren’t available to make sure your wishes are carried out. But rolling up your sleeves and completing your estate plan can provide peace of mind that allows you to be happier in the present.
If you need help creating or updating your investment, retirement or estate plans, we may be able to help. That’s just part of what we do. And from all of us at Intelligent Capitalworks, we wish you a very healthy and prosperous new year.