A year may not seem like a long time, but a lot can happen in 365 days. Since last February, you may have changed jobs, received a raise, gotten married or divorced, brought home a baby or had one of your kids move out of home.
A yearly financial checkup can ensure that your financial plans are in tune with your life. It doesn’t need to take long. You can do a big-picture review quickly and save follow-up tasks for later, start now if you have 15 or 30 minutes, or pin this list on your fridge or at the top of your to-do file to get 2019 off to a profitable start:
- Add up your assets, including your super and other investment and savings accounts, and your liabilities such as your mortgage or car loan. Can you access all those accounts easily? That is, do you know the account numbers for each and where the password is if you have online access?
- Figure out whether your net worth (assets minus liabilities) is growing or shrinking. Ideally, your assets should be growing and your liabilities shrinking. If that’s not the case, figure out why. You may have a good reason, such as making a down payment for a house with a mortgage that increased your liabilities. But if the reason is not positive, decide whether you need to change anything to get those numbers heading in the right direction.
- Review big changes in the last year that may affect your finances. For example, if you got a raise, consider directing some or all of it into your super or another investment. If you had a child, you may want to start saving for university or review your insurance to determine whether your coverage is still appropriate. Do you need to change beneficiary designations on any accounts?
- Consider rebalancing your portfolio to make sure your investments continue to be aligned with your financial goals. Your asset allocation – the amount of your portfolio dedicated to shares, bonds and cash – should be diversified according to your goals, age and risk tolerance. The ups and downs of financial markets may put your allocations out of whack. Selling assets that have appreciated and reinvesting in those that have fallen in proportion to your overall portfolio can restore your desired allocation and reduce your vulnerability to a decline in a single asset class.
- Take a look at your budget. Is your spending aligned with your income and your personal goals? If you don’t have a budget, create one. You don’t have to track every gold coin unless you want to, just be sure you capture the majority of your expenditures. If you want help, you could try out some popular budgeting apps.
Now, make a list of follow up tasks, and you're on your way.
Written by Robin Bowerman
Head of Corporate Affairs at Vanguard.
19th Feb 2019