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Time For A Financial Check-up!

Updated: Feb 2, 2023

The second quarter of 2015 is well underway. At the end of the first quarter (January 1 – March 31, 2015), the S&P 500 closed at 2067.89 (+0.5%), the NASDAQ closed at 4900.88 (+3.7%) and the Dow closed at 17776.12 (-0.3%). Not a very stellar first quarter!

How did you fare in the first quarter? Do you know how your portfolio performed? Is your financial plan going as expected? Is there a need to adjust, or is it ok the way it is?

Most of us are past the frenzy of the new year, tax season, etc., and are finally settling into a rhythm for 2015. While you catch your breath, it’s the perfect time to review and reflect on your Financial Plan and Investment Strategy.

To begin with, which of these three situations best describes you?

  1. You haven’t started investing, but have been mulling it over.

  2. You only invest in your employer sponsored plan, such as a 401(k) or 403(b).

  3. You invest in your employer sponsored plan and have an IRA and/or other investment account.

Regardless of the situation, a financial check-up is beneficial. Here’s how a check-up benefits each situation.

No Investments … yet

A financial plan or strategy isn’t strictly about investing, so even though you haven’t started investing, you have a Financial Plan whether you know it or not! Your plan may not be formal, but you are making financial decisions according to that plan.

How is your plan working for you? If you are not satisfied with your current financial situation, and can’t see it improving in the future, then the plan is likely not working for you.

For your initial financial check-up, consider doing the following:

  1. Write out your plan. It doesn’t have to be long or complicated. It can be as simple as “open an investment account and contribute regularly.”

  2. Set measurable, achievable goals. This is how you’ll know whether you’re on track, or if you have to make any adjustments for your plan. An example could be “open an investment account by the end of June 2015 and contribute $50 every month.”

  3. Identify a specific date, month or year when you will start investing in the stock market, and not just hold cash in a savings or investing account. An employer sponsored plan, such as a 401(k)/403(b), or an IRA is the best place to start.

Employer Sponsored Plan Only

Congratulations on investing and participating in a retirement plan! According to the U.S. Department of Labor, of the 62 million wage and salaried women (age 21 to 64) working in the United States, just 45% participated in a retirement plan.

If you are like the majority of investors, your portfolio is on autopilot. You selected the amount to be withdrawn from each paycheck, allocated your contributions to a few investments, and never looked back! Automatic withdrawal from your paycheck is a great strategy, and becomes even better when coupled with regular check-ups.

For your initial financial check-up, consider doing the following:

  1. Develop a clear investment strategy, and write it down. For example, one of your strategies could be to “increase contributions every year.”

  2. Set clear, measurable and achievable goals. For example, one of your goals could be to “increase contributions by 1% annually.”

  3. Rebalance your portfolio, if necessary. How have your investments performed? The weighting (percentage of your portfolio represented by each investment) of your investments may now be out of whack if certain investments have performed extraordinarily well. Rebalancing will help you stay on track with your investment strategy.

Multiple Investment Accounts

It may surprise you to know that you are in very rare company when you contribute to more than one investment account.

For your financial check-up, consider doing the following:

  1. Ensure you have an investment strategy with measurable and achievable goals that apply to all your accounts as a whole, not individually.

  2. Take a holistic look at your portfolio performance. Instead of reviewing your employer sponsored plan and then your IRA or personal account, review all your investments together. How does the big picture look? Are you on track within each account, but off track once combined?

  3. Rebalance your portfolio, if necessary. You may find that some investments have performed really well and thrown your portfolio out of balance.

  4. Reallocate, if necessary. After taking a holistic look at your investments, it may be necessary to reallocate your contributions to match your overall investment strategy.

A Final Word

Frequent check-ups, quarterly or semi-annually, are beneficial in helping you stay on track with your plan. For these checkups to be effective, you must have a plan with measurable and achievable goals.

Topics discussed:

  1. Financial check-ups

  2. Rebalancing

  3. Reallocation

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