Time For a Financial Check-Up?

How often do you go to the doctor for a check-up? We hope at least once a year, or better yet, twice! The reasons are obvious; frequent check-ups can catch medical problems early, allowing for immediate treatment before they become bigger problems. If only people had the same attitude to financial planning. Like your health, your life situation is constantly changing, significantly affecting your finances. Delaying or ignoring them can lead to catastrophe. In this article, we hope to persuade you why checking on your finances is just as important as checking on your health, especially considering how intertwined they are.

Why You Should Visit Your Financial Advisor

Greater Control: A recent study concluded that about 77% of Americans don’t have a formal financial plan, and 37% have done no planning at all. To us, as both CPAs and financial advisors, that’s like trying to steer a ship without a helm, drifting whichever way the financial winds take you. Yes, you might eventually make it to where you need to go, but it’ll take a lot longer.

Enhanced Happiness: Money can’t buy happiness, right? Well, it actually can, at least to a point. It’s more that money is a good shield against events and situations that could lead us to being unhappy: unpaid debts, medical expenses, and emergencies, for example. Once we eliminate those, our stress is likely to melt away as we have less fear of the unknown and unexpected. And the quickest way to achieve that, save from suddenly striking it rich, is to have a financial plan. Once it’s in place, you’ll save more, reach your goals faster, and experience higher levels of happiness.

Improved Readiness: In 2023, a staggering 434,064 non-business bankruptcies were filed in the US, stemming from a variety of issues. While medical debt takes the lead as to why people file for bankruptcy, other issues play a significant role: overspending, inability to manage debt, and financial emergencies. Having a plan and sticking to it means you’ll not just be living within your means, but you’ll also have an emergency fund so you don’t fall back on high-interest credit card debts or early withdrawals from your retirement and investment accounts.

Key Areas to Review in Your Mid-Year Financial Checkup

Reflect on the past six months. What’s changed? Even if your family situation remains the same, other factors might have shifted in ways you might not fully realize, potentially affecting your financial plan and tax situation. Making small adjustments now can have significant long-term effects. Whether it’s tweaking your budget, rebalancing your investments for tax efficiency, or updating your insurance coverage, these minor tune-ups can keep your financial strategy on track and your financial engine running smoothly all the way to retirement.

Revisit Your Financial Plan and Budget

First things first: your financial goals. Have you achieved any of them? What’s your progress like? Maybe some goals aren’t even relevant anymore and can be removed from your list, warranting a change in your plan. If you’ve accomplished some of them, what are your new goals?

What about your budget and tax situation? What’s changed on that front? Has inflation eroded your earnings more than anticipated? Is now a good time for a Roth conversion? Are you taking advantage of all possible tax deductions in a timely manner? While it may feel good to get a tax refund come tax season, that could mean you were overpaying in taxes throughout the year. That money could have gone to better places, such as investing, paying down debt, or funding a specific financial goal.

Life Changes and Beneficiaries

Life doesn’t stand still, and neither should your financial and estate plans. Have you gotten married? Divorced? Welcomed a new child or grandchild? Bought a house, relocated, or changed jobs? These major life events can significantly impact your financial picture and tax situation, warranting a careful review and update of your plans. Don’t forget to update beneficiaries on all your accounts and insurance policies, as well as your will and advance medical directive. Consider the tax implications of these changes, such as new deductions you might be eligible for or changes in your filing status.

Insurance Coverage Assessment

As your life changes, your insurance coverage needs to change as well. Being overinsured can unnecessarily drain your resources, and being underinsured can leave you and your family vulnerable. The general rule of thumb is to have a death benefit equal to 10-15 times your annual salary plus debts and other sizeable financial considerations, like college costs. However, insurance can be quite complex, so we recommend always sitting down with a fiduciary financial advisor to determine the best policy for you – not with an insurance agent.

Rebalance Your Investment Portfolio

Your investment portfolio will eventually begin to drift from your original allocation. That’s natural and basically unavoidable. But you shouldn’t let it drift too far; otherwise, you’ll find yourself at odds with your risk tolerance and financial goals. That’s why it’s necessary to rebalance your portfolio from time to time. Plus, there are some unexpected benefits from portfolio rebalancing, such as consistently buying low and selling high – something many investors fail to achieve! Additionally, for your taxable accounts, a check-up and rebalancing may reveal opportunities to harvest capital losses to help offset your capital gains, thus reducing your overall tax burden.

In Conclusion

We get it – life is hectic, and finding the time to meet with your financial advisor to review your plan always seems to take last place in your priorities. But you shouldn’t wait too long, as minor issues can snowball out of control, exposing your life to unexpected twists and turns. If you were told a meager hour or two could earn you more money and save on taxes, wouldn’t you agree? That’s essentially what a review is. Just a couple of meetings a year with your advisor can mean the difference between stress and happiness, confusion and clarity, and success and failure.

If you don’t have a plan, it’s high time you got one! Click the button below to schedule a consultation with Walters Strategic Advisors, and let’s work together to ensure your finances are optimized for both growth and tax efficiency!