Andrew Rosen, Contributor
June 9, 2022
Check-ups are a part of life, from your physical check-ups at the doctor, to your dental check-ups at the dentist – even your car gets a tune up on a regular basis. It makes sense that your financial life should also get a regular check-up as well, to ensure that you’re on the right track for your financial goals. Financial check-ups can (and should) be conducted on your own, or with a significant other if applicable, but they also can be conducted with the help of a financial advisor who can assist you with creating your goals, providing financial modeling and forecasting, and with providing unbiased financial advice.
Here are the top 10 reasons that you should schedule a financial check-up at least once a year:
- Course Correction – The first reason for regular scheduled check-ups is the ability to course correct. If you don’t come in for three years, you may find that you are now three years further behind. For example, if you have some unexpected expenses com up, it may lower your savings and you might neglect to adjust your financial plan for this change, which can put you behind in trying to reach your financial goals. The longer you go without checking in on your finances, the longer it will take to course correct and get you back on track.
- Track Progress – Modeling can be a key component to your financial success – after all, it gives you insight to potential changes that you might make with you finances and gives you a way to track your goals. Your goal might be the goal of retirement of course, but it can also include smaller goals, such as funding college for a child or a grandchild, or even smaller goals of redecorating a home or saving for a vacation. Without fully understanding your goals and how you’ll fund them and having a good way to track your progress toward those goals, you’re just guessing at how you’re doing with saving your money, and that isn’t a good scenario for saving for your future.
- Benchmark – Often times the same modeling provided in a financial checkup with an advisor gives you a sense of where-do-I-stand versus others in similar situations. It’s also a great learning tool. Financial modeling during these check-ups gives you a sense of not only where you are in relation to your own goals, but where you may be in relation to your peers as well.
- Validate – Reviews with your financial advisor provide an open opportunity and forum to validate your decisions and the changes that you make with your finances. The changes that you made during your last check-up will impact the results that you’ll see at this check-up. Just like at your doctor – any lifestyle changes that you’ve made may be reflected on the scale or in your bloodwork – any financial changes that you’ve made with your savings you may see at your financial check-up. It’s nice to see your hard work throughout the year in action at a check-up.
- Reforecast – A financial advisor can’t predict the future, and when they run forecasts and projections on your finances, they are just that – projections and forecasts. By their nature, they aren’t meant to be perfect. We’re all human and constantly changing, and our finances are too. This is why we need to continually check in on our finances and our goals, to ensure that we’re saving the correct amount, that our spending habits haven’t drastically changed and that our needs haven’t changed beyond what they were at the last check-up.
- Things become more accurate – The more often you check-in with your finances and fine-tune them, the more accurate the forecasting, modeling and projections tend to become.
- Clean up old items – A frequent look into your finances gives you an opportunity to find things you may have missed and clean up anything before it gets too old and stagnant.
- Accountability – When you commit to checking in on your finances, either with yourself, a spouse, or an advisor, you’re ensuring accountability that it will get done.
- Clear up misunderstandings – A check-up with a financial advisor is an opportunity to clear up any misunderstandings you may have about your finances, the market, or investing in general.
- Understand what has changed – Sometimes more than just a financial situation has changed. It happens all the time; other important data points have changed, or even risk tolerances. In a financial check-up, you can understand and adjust for all changes.
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