Just as a yearly physical is essential for maintaining your physical health, an annual financial checkup is crucial for your financial well-being. While comparing yourself to others isn’t always helpful, focusing on key areas can ensure you’re on track to achieve your unique financial goals. This article outlines five critical areas to review annually, providing expert tips to optimize your financial health.
5 Essential Components of Your Annual Financial Checkup
We recommend focusing on these five key areas during your annual financial review:
1. Review and Update Your Financial Goals
Start by asking yourself, “What’s on my mind?” This simple question helps uncover any life changes or upcoming events that could impact your financial situation. Regularly reviewing and updating your financial goals ensures your financial plan remains aligned with your current priorities and values. This is the foundation of sound financial planning.
2. Identify and Address Financial Pain Points
External factors like elections, health concerns, family needs, and economic shifts can create financial “pain points.” Identifying these concerns allows you to proactively adjust your financial plan to address them effectively. A robust financial plan should not only address immediate anxieties but also provide a long-term strategy for achieving your goals despite these challenges.
3. Optimize Your Retirement Plans and Investments
The new year often brings changes to salary, contribution limits (like 401(k)/403(b) contribution limits), and investment options. Maximizing retirement savings is crucial. Even a small increase in contributions (1-2%) can significantly impact your long-term savings. As retirement nears, reassessing your risk tolerance and adjusting your investment portfolio accordingly is vital to protect your assets.
4. Maximize Your Investment Returns
Several factors can erode your investment returns, including internal expenses (management fees, trading costs) and taxes. Implementing tax-efficient strategies, such as investing in ETFs instead of actively managed mutual funds or gifting appreciated stock, can significantly improve your after-tax returns. Minimizing internal expenses is equally important for maximizing long-term investment growth.
5. Stay Informed About Policy Changes and the Economic Landscape
Staying informed about state and federal policy changes is essential. While some changes, like contribution limits and tax brackets, occur annually, others, such as estate tax laws or significant economic reforms, happen less frequently but can have a substantial impact. Keeping up with these changes is crucial for effective financial planning.
Conclusion
Regularly reviewing these five key areas is crucial for maintaining your financial health and ensuring you’re on track to achieve your goals. At Voisard Asset Management, we stay informed about policy changes and the economic outlook, and we’re here to help you navigate any concerns or changes in your financial goals. Contact us today for a comprehensive financial checkup.
