Don’t shoot the messenger, but fall is in the air. This past weekend in Calgary highlighted that summer isn’t quite ready to let go, but for those who have lived here a while, you know we are on borrowed time.
Fall is when routine returns. The kids are back to school (insert parent cheers here). Vacations are over and things pick up at work (insert parent sighs here). Meetings often resume at a greater pace.
Many of the meetings we have been having lately involve a review of the client’s financial plan. Fall is an excellent time to review your financial plan – and if you don’t have one, well, it’s a great time to get started.
There are many reasons you should review your financial plan. Some are obvious.
Change in marital status? For sure. Job loss? Absolutely. Inheritance? No brainer. Major life events should always warrant a review of your financial plan, but choosing to review it at least annually has benefits as well. With that in mind, here are at least three reasons you should review your financial plan annually:
1. A Lot Can Happen in a Year
Your life is not static. Things change. First, there are things outside of your control that can have an impact on your plan. Inflation, interest rates (even if you have no debt) and seemingly never-ending tax changes are just some examples of the external factors that need to be periodically reviewed as they relate to your plan.
Aside from these things, a lot can happen in a year for you personally. Consider things like changes in your health, employment salary or duties, aging parents, or shifting stages for your children. The point is that life is unpredictable and everchanging.
Going too long without a review increases the chance that you may need to take significant or drastic measures to get back on track rather than minor adjustments. Checking in annually allows you to discuss each of these factors with your trusted advisor and decide how much is just ‘noise’ versus actual impact. (More on that in point #3.)
2. Your Objectives or Goals May have Shifted
As we age, our priorities naturally shift. While in your twenties, you may have thought the ideal retirement would take place on a remote tropical island sipping pina coladas. In your fifties, you may have a completely different ideal. Family and relationships often become more important. Where you thought you would retire may have changed. After all, those grandbabies carry a lot of pull! I’ve seen it. Maybe work is engaging and you’re feeling like working longer in your peak earning years. Or maybe it’s the exact opposite and you’re wondering if you can retire early. Going over the details of your financial plan through the lens of your current self can help you evaluate whether your objectives have changed enough to impact your plan. This also gives you the opportunity to have your advisor run various scenarios to help you visualize the tangible outcomes of these shifts in thinking. In my experience, these are the things trust and good relationships are built on.
3. Am I on Track? Know Where You Stand.
All the other stuff aside, this is what it’s all about. You took the time to set some goals, put away some money and you want to know if it’s working. Setting an annual time when you’ll review how your plan is progressing is an important element in meeting your goals. And sometimes, it can be quite simple.
Financial plans will usually have a net worth summary projected each year into the future based on reasonable assumptions. Are you where you thought you would be? If you find out that you’ve gone off course, you may (or may not) need to make some adjustments. If you find you are ahead of plan, you may have some additional options. Either way, the process provides peace of mind and can lead to some valuable conversations with your financial advisor. Doing this annually will help ensure you stay on track, adapt to challenges, and even course-correct if necessary.
Simply put, reviewing your financial plan annually is worth the hour of your time. To ensure you stay on track, why not make it part of your fall routine? Just as the kids get back to school, get back to your plan. In the long run, you’ll be happy you did.
