Schedule Your Annual Financial Checkup

Look just about anywhere today, and you’ll find someone wearing a Fitbit, or some device that tracks steps, sleep and pulse rate. This is all part of a trend towards raising consciousness around our health and well-being. The idea is that increased awareness will bring about a change in behavior and, ultimately, improved wellness. The same applies to your financial well-being.

Just as having an annual physical exam can keep you informed about your health, an annual financial checkup can raise awareness of personal circumstances.

Armed with your financial data, you are more likely to make better choices that lead to improved outcomes.

An annual financial checkup should encompass a review of the last year and a look ahead to set goals for the coming year.

Spending– How much did you spend last year? If you are not already tracking your expenses, use this simple equation to figure out what you spent last year: Income minus Taxes minus Savings (401k, or otherwise) equals Spending. Have you broken down your spending by category? Are there any categories that surprise you? Can you make adjustments or take advantage of any cost savings? Consider using your bank’s website or a budget app like Quicken or Mint.com to keep you on track.

Savings– Calculate last year’s savings as a percentage of your income. If it isn’t at least 15%, then your first goal should be to increase savings in the coming year; set a goal that is challenging yet within reason. Also assess your emergency fund and work towards accumulating enough to cover at least 6 months of expenses. An emergency fund affords peace of mind.

Investments– Take out your year-end statements and make sure you understand your investments and their associated costs. If you hold individual stocks, has any one of them appreciated to an outsized percentage of your portfolio? If so, consider paring back. Being broadly diversified across securities, asset classes and investment strategies helps moderate the ups and downs of the market and can create a smoother path to your goals.

Retirement Planning– Make every effort to maximize your retirement savings contributions. Your annual contributions to IRAs or Roth IRAs can be made up until April 15 of the following year. If you have an employer-sponsored plan, make sure you are taking full advantage of employer matching. If you don’t have a tax-deferred account, talk to your advisor about your choices.

Insurance— Life insurance needs change as you age. Buying a house, having children and paying off your mortgage may all require a change in coverage. Review your health coverage and determine whether you are eligible to open and fund a health savings account. An HSA can fund current health care expenses but also allows you to save tax-free for future health care needs.

Taxes – Review and understand last year’s tax return. Were there any dramatic changes from the year before, and if so, why? In light of the new Tax Cuts and Jobs Act, you may want to take extra time to review tax withholding from income and whether or not you will be able to take deductions and credits for retirement and education savings, dependent care, medical expenses and charitable giving.

Estate Plan – Re-read your will and make a summary so you can readily refer to it down the road. Have you designated an executor for your estate as well as guardians for minor children? Check retirement plan and insurance policy beneficiaries to be sure they are up to date. Marriage, divorce, deaths and changes in financial circumstances may necessitate revisiting your estate plan.

Just like diet and exercise, taking control of your finances is an ongoing process. Hopefully this checkup finds everything to be in order. If not, take the necessary steps now to become financially fit!

Kerry B. Connell, CFP®

Kerry joined HTG in 2014. She helps clients create a picture of their financial goals and directs investments to attain those goals. Kerry is also involved in the firm’s management and strategic planning initiatives and contributes to HTG’s educational and networking efforts.

Kerry is a CERTIFIED FINANCIAL PLANNER™ practitioner. She has a BA degree from Tufts University and an MBA/JD from Northwestern University.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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