The time of year has arrived to assess your finances. It’s a great opportunity to make sure you’re in tip-top financial health. Use this financial check-up guide to help you answer key money questions, spot potential problems, and then act accordingly.
Remember your goals and evaluate how you’re progressing. Without goals and tracking, you have no way to gauge your success. Taxes are a necessary evil but if you take some time to think about them right now, you’re going to be in a better spot come April. It’s easier to make small changes now rather than be hit with a surprise later. Plenty of attention should be given to your investments. They need a careful re-examination and adjustments as well. And give some early thought to the upcoming holidays.
Review your goals and progress
If you are like most people you probably set some goals early in the year, as either part of a New Year’s resolution or just trying to get a fresh start on something. Have you stuck to achieving those goals? Have you been regularly tracking your progress? If the answer is no, this is a great time to revisit the goals and to see where you stand.
Was your goal to reduce debt? Increase savings? Get a raise? Buy a house? Whatever your goals are, it is important to keep tabs on them and track your progress. We live busy lives and it is all too easy to get caught up in other things.
These are the steps you can follow to get back on track:
Identify your goals
Track your progress
Make the necessary adjustments
Whether it calls for saving more, spending less, or any other option, it is much easier to make minor changes along the way than it is to make drastic changes in an emergency.
Check your tax status
You should first review your taxes withheld, year-to-date. If you are employed this can be as easy as looking at your latest pay stub and looking at the total amount of federal and state taxes that have been withheld so far this year. This is important because over the past several months you may have had something occur in your life that could put you into a position where you end up over- or under-withholding. If nothing has changed from last year you can pull out last year’s tax return and compare to see how close you are.
If something will be happening or has already happened that can change your tax liability, this year this is a perfect time to make changes. Checking your W-4 exemptions is a good idea if you didn’t review those exemptions at the beginning of the year. If you didn’t make any adjustments this year you can quickly run through the IRS withholding calculator to determine what you should be filing. As with everything else in this fall financial checkup, it is easier to spot problems and make small changes with three to four months left in the year, as opposed to being surprised when it is too late to make any adjustments.
Re-examine your investments
You should also check in on your investments and see if any changes need to be made. Whether you make frequent changes or rarely touch your investments, your fall financial check-up ensures things are still on track and confirm your investment mix is right for you. If you haven’t rebalanced your investments in a while, or maybe you realized your target date fund just changed their investment strategy or increased the expense ratio. Whatever the case may be, use this time to evaluate how your investments are doing, determine if any changes need to be made, and ultimately tie everything back into your goals. Make sure that your investments reflect how you plan on reaching a goal, such as retirement, college savings or buying a home.
If your core holdings are in an asset allocation or target date funds, you have a pretty easy review. Since these funds are designed to keep a specific allocation and/or to adjust their holdings automatically over time, there is a good chance that you won’t have to make any changes. Take a look at your holdings and make sure nothing has changed.
Some key developments to look for:
The mutual fund business is competitive and managers can sometimes take measures to try and boost performance. This is a good time to check your portfolio and be sure the fund is still investing in the way you thought it was.
Has the fund kept expenses steady from last year or have the managers made changes?
How has the fund performed relative to its peers? If you are noticing significant underperformance or if it is significantly outperforming its peers, that should be a red flag to check and find out why.
Many people take a more hands-on approach to investing and pick and choose various individual funds, exchange-traded funds or stocks to create an appropriate investment portfolio. This does put you more in control. But with this method comes the requirement to pay a little closer attention and possibly make more regular changes to create your own asset allocation.
The most common portfolio changes take the form of rebalancing. This means of course that you have selected a specific investment mix, let’s say a 70 percent stock and 30 percent bonds. Over the course of time, depending on the types of returns of the underlying investments, your target mix will change. If stocks are returning 15 percent and your bonds are returning 2 percent, you can change that this time of year so your portfolio is now 90 percent stocks and 10 percent bonds, far from your initial target.
Start your holiday planning early
Finally, instead of waiting until the day after Thanksgiving to really get serious about the holidays, why not get started in early fall? Sure, it may seem like you have all the time in the world, but we all know how quickly time flies. Right now you have three to four months to get ready for the holiday season. What should you start doing right now? How about starting a savings fund for all those holiday gifts, celebrations and family travel?
So, there really isn’t a better time than now to use our financial check-up guide to make sure your money is on the right track. And by doing so, any problem that turns up will be caught early enough so that making changes won’t be too difficult.