Financial planning is a task that many people do in their personal lives. Budgeting, paying bills, filing taxes, and shopping for insurance policies are all common tasks people do to manage their finances. However, for those who may be a bit more passive, maintaining and updating their financial goals and outlooks can often be forgotten or put aside. And that is okay! Understandably, we all live very busy lives and it is easy to overlook critical aspects of your personal financial planning. To achieve a better understanding of some common items that one may wish to revisit within theirs or their family’s financial plans and projections, below is a helpful list of things to consider:
- Major Life Changes – If you or a spouse experience major changes such as job change or loss, death of a loved one, having new children or grandchildren, buying a house, moving to a different state, or buying cars or boats, it is very likely that there will be some drastic changes to your personal finances. You will want to make sure you can comfortably afford the lifestyles that you wish to have on a normal basis.
- Helping Family – Whether you have elderly or disabled loved ones that are experiencing difficulties, or your children are beginning to fly off and become more independent on their own, you will want to make sure that any needs that you would like to help those who have a harder time helping themselves are reachable within your financial plan. Proper budgeting and cash flow analysis can be a great tool in making sure you can comfortably afford to be of assistance to those you wish to help.
- Revisiting Asset Allocations – As we get older, traditional financial planning wisdom suggests that reducing your exposure of equities and increasing exposure to fixed income is advantageous in terms of risk avoidance. What does this mean? It basically suggests that, to protect yourself from facing potentially steeper losses in the event of a stock market correction, reducing the number of stocks you own in favor of bonds is especially advantageous as you age and have less time for recovery in a long-term planning strategy.
- Reviewing Debt – Debt is something that can help many people reach their goals, such as buying homes, achieving an education, owning vehicles, or starting a small business. However, many people have debt that can prevent them from achieving a sound financial position, and paying off the debt can be highly beneficial. You will want to review any credit card debt, personal loans, mortgages, student loans, business loans, auto loans, etc. and explore potential strategies to pay down, refinance, or eliminate debt that is, or could become an issue for you.
- Retirement – If you are close to retiring or are recently retired, this is an excellent time to revisit your plan. Taking distributions from retirement accounts, finding out when to take social security, creating estate plans, and finding out what types of lifestyles may be possible for you are all important planning items to consider as you reach your golden years. Proper tax planning can be of major assistance in retirement, and can make a significant difference in how you can spend and enjoy the money you have worked so hard to earn.
As always, financial health is something that should be considered a crucial life maintenance item, just as mental and physical health can be. These five items are just a few of many that a financial advisor may be able to help you navigate if you have not recently updated or reviewed your personal financial plan.