Plan Performance Direct

THE Wealthier + Wiser Blog

Helping you better understand your money so you can reach your goals

3 Steps to review your finances yearly

As we approach the holidays, this is the ideal time to reflect on your 2018 finances as well as create a focus for 2019. Reviewing how you performed financially this year can help you gain a greater understanding of what needs to happen for your finances in the year ahead.

Cash flow

This is the most important step. Ultimately, you want to manage your personal income and expenses the same way any well-run business would manage its finances. First, you need to look at money that actually came in the door from all income sources and couple that with a review of what went out the door in the form of expenses.

This information should show if you were able to save and how much, so you can figure out how to save more in the future. By saving, I don’t mean cutting out your weekly coffee or bringing your lunch to work so that you can save a few hundred dollars next year. I’m talking about a major lifestyle review: the type of home you live in, the car you drive, etc. Looking at these items will give you a better idea of whether you’re truly living within your budget.

Bottom line: You should aim to save more than 10%, hopefully closer to 20%, of your total income. Those savings can come in the form of adding to your checking account, saving in your company retirement plan or saving in an online investment account.

Investment performance

The purpose of this review is to take stock of how you’re performing to see if you’re allocated correctly. Too often, people hear and see that the market is going up or down and fail to take time to review their investment portfolio. As a result, years can go by without properly reallocating your investments. Catastrophic financial mistakes can be avoided if you spend the time once or twice a year to review your investments and make sure you’re on target.

Review your plan

Your financial plan should incorporate all aspects of your income, expenses and savings as well as inflation, taxes, real estate, life insurance, disability insurance and even long-term care insurance so you can see your entire financial life come together. You may have read that list and said that’s a lot of stuff, but a comprehensive plan creates a working model of all financial components mapped out over a lifetime. So, take the opportunity, before the end of the year, to review your existing plan to make sure you’re on target with your investing and savings.

While you’re going through your plan, make sure you have your important documents saved with it. Most financial planning software allows you to save wills, trusts, passports, deeds, car titles, etc. electronically.

In the end, the one person who is ultimately responsible for your success or failure is you, so take the time to make reviewing your financial life a priority.

Are you looking for an Arizona wealth management firm to provide personalized investment management? If so, contact the wealth advisors at Henry+Horne Wealth Management.

Michael Carlin, AIF®