What You Can Learn From Reviewing Your Financial Situation in 2017

Don’t read this blog post now – save it for the week between Christmas and New Year’s and read it then. Let’s face it, you’re running around like your hair is on fire trying to finish work projects, attend parties and finish your gift buying. But that week after Christmas is usually pretty slow. If you’re working, there aren’t a lot of phone calls. If you aren’t working, outside of a movie or maybe ice skating, there’s plenty of free time. Take one hour during that week and 1) Read this blog post; and 2) Review the following items:

Did you meet your short-term goals for the year?

We should always write down our goals for the year, right? Exercise more, read more for pleasure, etc. Because writing down a goal helps make it real and measurable. But, do we? Uhhh, did I save that cocktail napkin somewhere?

Whether we have our 2017 financial goals written down or not we probably still have a pretty good idea of what we intended to do. Did you want to establish a budget? Did you intend to save a certain amount of money for retirement for the year? Did you want to pay down student loans or maybe refinance your student loans? Did you shoot to establish an emergency fund to cover 3-6 months of living expenses should something interrupt your income?

Take just a few minutes and measure whether you accomplished those items you intended to – even if you didn’t write them down as a specific goal. If you hit the mark, raise a glass of eggnog for yourself. If not, choose one goal – the most important financial goal for 2018 – and write it on your computer somewhere where you won’t lose it. Make it measureable and achievable and, if possible, make it systematic where you don’t have to think about it each month.

How did your investments perform?

The stock market has been amazing this year. Not only is the S&P 500 up about 18%, there has been very little volatility – ups and downs of the market. In fact, this year has seen the lowest volatility since 1970. So, how did your investments perform?

Because the stock market has performed so well, this is a good time to look at your asset allocation: what percentage of your investments are in categories like Long Term Income, Growth, Real Estate and International? As stocks increase, including stock mutual funds, it’s easy for your portfolio to get too heavily weighted toward stock mutual funds, exposing you to unnecessary risk when the stock market declines at some point. One of my favorite quotes comes from the former boxer, Mike Tyson, who once said, “Everybody has a plan until they get hit in the mouth.” In our context, when you’re figuratively hit in the mouth when the stock market declines, do you have a plan? In other words, are you properly diversified so your portfolio includes funds that aren’t tied directly to the stock market and they hopefully zig when the market zags? In addition, is your portfolio structured for your personal time horizon and goals?

Did you follow your long-term plan?

Did you save as much for retirement as your long-term plan calls for? Is the total of your investment assets where you planned for them to be at your age? If you are behind, what is the cause?

A well thought-out financial plan should examine your current lifestyle/expenses and inflate them to a point in time when you would like to stop working. Age 55? Age 65? Then, how much in investment assets are required in order to produce annual income sufficient to cover those expenses for the rest of your life? Then, your plan should have concrete steps and measurable goals along the way to eat that elephant one bite at a time.

Merry Christmas, Happy Hanukkah and Happy New Year! Thank you for reading my blog – you can subscribe at the bottom of this post and have it delivered via email each week – and look for it again on Friday, January 5.