completing a financial checkup

Examine your spending and saving habits, goals, investments, and budget to figure out what you should do

Whether you are new to budgeting your money or you’ve been budgeting for a while, understanding where your money goes or how to improve your financial goals is a life-long process. The best way to work toward financial goals and know if you are on target to meet them is to map out the steps to take.

Here are six simple steps to help complete your financial checkup.

Evaluate investment portfolio

Monitoring your investment portfolio on a regular basis is important to your long-term financial success. If you have an advisor, your investment management team most likely is reviewing your portfolio daily, even if you don’t see any activity. We recommend you review your investment accounts quarterly so you can stay informed, and not become too attached to short term fluctuations in your balances. Every portfolio needs to be monitored to ensure it is matching up relative to your goals and the risks you are assuming.

In addition to reviewing your portfolio on your own quarterly, be sure to meet with your advisor annually to make sure your portfolio is still in line with your goals. A regularly scheduled checkup can keep your finances on track and help uncover any changes that need to be made either to your investments, your goals or both.

Max out annual contributions

When creating a savings strategy, it’s always important to make contributions on a regular basis to ensure you’re always paying yourself first. For some accounts or goals, it makes more sense to wait until the end of the year to make your contribution. Sometimes you’re waiting for a year-end bonus or confirming you’re able to meet other savings goals with higher priorities first, and that’s ok.

Your financial checkup at the end of the year is a great time to distribute any extra funds and max out your annual contributions. This is especially important for any accounts that have annual limits with year-end deadlines and possible tax benefits. This is the time to take advantage of all investments like 529 contributions and college savings.

Successful investing and saving starts with laying out clear goals and making sure your performance is meeting them over time.

Tax harvesting

A common strategy taken throughout the year as well as during year-end planning is tax loss harvesting. The goal of this strategy is to identify any investments within your portfolio that are currently showing a loss from the original value and use those losses to reduce taxable income. There are some technical requirements when harvesting losses so be sure to connect with your advisor to make sure this strategy is being utilized correctly.

Optimize your taxes

Many accounts used for saving money have tax benefits. Accounts like IRAs for retirement, 529s for college savings and health savings accounts for health expenses all have great tax benefits. Benefits vary across accounts but be sure to talk with a tax professional and your financial advisor before filing your taxes. You could be leaving thousands of dollars in tax benefits on the table annually.

Plan for next year

In line with reviewing your budget, taxes, and investment portfolio, coming up with a financial strategy for the upcoming year will allow you to identify areas that need to be adjusted and determine how you want to allocate your spending next year. It can be impactful to look back and see how much you spent on dining out or how much your morning latte actually costs for a whole year.

Oftentimes little adjustments to your spending can fund other goals. Looking ahead and planning out your spending can help you achieve your goals. Deciding to dine out less frequently may be able to fund other goals like a family vacation or that home renovation you’ve always wanted. Financial planning is all about prioritizing your dollars; sometimes small changes can help you achieve large goals.

You should always try to save throughout the year for large purchases or goals you plan to have in the near future. Saving throughout the year helps avoid a lump sum cash need and makes you more likely to fund your purchase. Developing better habits and reprioritizing expenses will keep you on track.

Knowing your priorities and financial goals will help you determine the type of strategy you need. From a monthly budget to pay off debt to diversifying your portfolio of investments, you need an established routine to give you the foundation for your long-term goals.

A financial checkup helps you gain insight into your short-term financial needs, while providing direction for what you can do to put yourself on an even better financial plan for the future. Setting aside time once or twice a year can help prevent financial missteps and provide motivation to form new habits and improve your financial health.