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New Year, New Goals?

Women makes financial resolutions for 2024

The Importance of Keeping Your Financial Plan Up to Date

Are you starting the year off with fresh financial goals? Great! Recommitting to your finances by focusing on your goals is a great way to enter the new year. We believe one of the best ways to ensure progress toward your goals is by considering how they impact each part of your financial plan and making updates to accommodate them, including the following.

Account for life events.

One of the most important reasons to continually update your financial plan is to ensure it continues to meet your needs as your life evolves over time. Any time you experience a major life change, such as a marriage, divorce, new baby, death of a loved one, new job, etc., work with your wealth manager to make sure that change is accounted for across all aspects of your financial plan.

Update your goals.

Your goals may not be the same today as they were a year ago. Maybe you successfully saved for a down payment on a home and made a purchase. Perhaps your son graduated college and you no longer need to plan for that expense. Maybe you injured yourself skiing and decided that purchasing a ski condo is no longer something you wish to pursue. Whatever changes may have occurred in your goals over the last year, be sure to incorporate them into your financial plan.

Minimize your taxes.

Proactive tax planning can lead to significant savings over time, which is why it’s important to regularly check in on your tax planning strategies. If you’re a client of Creative Planning, your wealth manager regularly reviews your portfolio’s tax efficiency and makes changes as necessary to help minimize your tax liabilities. However, it’s still important to check in and ensure you’re taking advantage of all tax planning strategies available to you.

Check in on your investments.

When you and your wealth manager first established your portfolio’s asset allocation, you carefully chose a mix of investments you believed would give you the best possible chance of achieving your financial goals. If you’re a client of Creative Planning, your wealth manager will review your investments and target allocation with you in your annual reviews, discussing whether any changes should be made (as life events take place and risk tolerances vary).

If you aren’t with Creative Planning and aren’t regularly reviewing your investments, your allocation can begin to drift away from your targets (as some sectors outperform others over time). It’s important to periodically rebalance your portfolio back to your original (or an updated) asset allocation. Rebalancing is the process of selling off outperforming investments and reinvesting in lower-performing assets in order to get back to your target allocation. While this may seem counterintuitive, it prevents your allocation from drifting too far from your target investment ranges. This is an important risk management strategy because it prevents one asset type from dominating your portfolio and exposing you to too much risk.

Plan for retirement.

Planning for retirement is an important goal to focus on at any age. In fact, the younger you start, the better off you’ll be when you’re ready to retire. As you review your financial plan, don’t forget to review progress toward your retirement goals. If you’re financial situation allows, talk with your wealth manager about possibly increasing or even maximizing your 401k and/or IRA contributions.

Prepare for emergencies.

If you don’t already have an emergency fund, consider starting one as soon as possible. Generally, you should have at least three to six months’ worth of expenses set aside in a liquid account for emergency use. If you have an emergency fund in place but have recently dipped into it, be sure to focus on building it back up to your ideal level.

Protect your loved ones.

Insurance and estate planning are vital components of any comprehensive financial plan. After all, it’s not enough to simply build your wealth — you must also protect it. Work with your wealth manager to ensure your insurance policies continue to meet your ever-changing financial goals. In addition to standard policies, such as medical, homeowner’s and auto insurance, your recent life changes may require additional coverage, such as:

  • Liability insurance
  • Umbrella insurance
  • Disability insurance
  • Life insurance
  • Permanent life insurance

Your wealth manager can help you establish or update your estate plan with the help of an estate planning attorney. Just like your overall financial plan, your estate plan should be reviewed on a regular basis to ensure it continues to meet your needs as your life and situation evolve over time.

Could you use some help updating your financial plan? Creative Planning has you covered. Our experienced professionals are committed to your success at all stages of your financial journey. To learn more, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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