5 Reasons to Review Your Finances Annually

Just like you are supposed to see your doctor every 12 months to maintain your health and make sure everything is in working order, you should also be reviewing your overall financial situation every 12 months, too.

An annual review provides a snapshot of your current financial situation and available resources. Here are five reasons to review your overall financial health every year:

1. A Personalized Path to Help Achieve Your Goals

Although many people share similar goals, each path to success is highly personalized. Based on a number of factors including prioritization of goals and available resources, you need to first figure out what you want to achieve. (For more, see: The Importance of Making an Annual Financial Plan.)

Are you investing for retirement? Or saving for a wedding? A second home? Do you want to send a kid to college? How much will it cost? And what is your plan to reach these goals? Many goals change each year and your financial plan should change each year to accommodate your goals.

2. You’re More Likely to be Proactive

In order to achieve any goal, you need to take action to make progress toward that goal. Annual reviews help you think more intentionally about your aspirations and be more proactive about your financial future.

What will you do today to positively impact your financial situation?

  • Pay down your debt.
  • Review insurance policies.
  • Increase your emergency fund.

By reviewing your financial plan each year, you are more likely to be proactive in achieving your financial goals. You are forced to review your goals and have a new perspective on what you can do to achieve them.

3. A Lot Can Happen in a Year

Taking the time to recognize the many changes that can happen in a year, such as your priorities and family dynamics, will help you make minor adjustments to your financial plan. If you go too long without reviewing the plan you have in place, you may need to take significant and drastic actions to get back on course.

With a proactive approach instead of a reactive approach to your account review, you’ll have more financial peace of mind than those who only pay attention when things are bad. Periodic preventive maintenance to your financial plan is much better and easier than a major overhaul.

4. Turn Information into Knowledge

These days, lack of information is not the problem. The problem is more likely information overload. Financial advisors no longer need to provide information. They need to provide you with guidance on what to do with all the information, such as managing your different types of accounts and all the stipulations that accompany them.

Annual reviews help turn the information you are bombarded with into knowledge that provides actionable insight. Knowledge, with guidance on how to use it, empowers us to make better decisions. Leverage the bombardment of information to your advantage by reviewing your finances yearly.

5. Build a Solid Client/Advisor Relationship

Regular reviews, at least once a year, allow advisors and clients to build trust and stronger relationships. There is great value in having a professional who understands the evolution of your situation, goals and family dynamics.

To help provide clients with the advice and guidance they need, advisors really get to know their clients through regular reviews. This knowledge helps ensure that our recommendations are aligned with our clients’ goals and priorities. You will get the best advice from your advisor if they are able to review your finances yearly and develop a solid relationship with you.

Choosing not to review your financial situation yearly can result in the neglect of major problems with your financial plan. You may not be allocating your money properly, or you may not be using your money in a way that aligns with your financial goals. Reviewing your financial plan annually helps avoid these problems and can help you make the most of your money. (For more, see: Financial Planning: It’s About More Than Money.)

 

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