If you've taken on the task of mapping out your annual financial plan, you deserve a pat on the back. Making sure you've covered all the bases is important to both your short-term and long-term financial health. Keeping track of your progress with an annual financial planning checklist makes it easier to see which tasks have been completed and which you still need to tackle.
An annual financial plan takes a snapshot of the state of your personal finances. It balances your assets against your liabilities while considering your financial goals and what you may need to do to realize them. Your liabilities should include any loans, credit cards, and other personal debts. Don't forget to include your mortgage, rent, utility bills, and other monthly expenses.
It's a good idea to look at your financial plan annually, as well as after any major life event, such as marriage, divorce, birth, a death in the family, or any major event that can substantially affect your finances.
Kim Abmeyer, founder of Abmeyer Wealth Management in Dallas, Texas, suggests what her firm does with many clients. She breaks down the annual financial plan into quarterly reviews, "addressing cash flow planning for the year ahead, estate planning, risk management, and end-of-year gifting and retirement planning. It seems less daunting for clients to work through it this way."
Nate Creviston, manager of wealth management at Capital Advisors in Shaker Heights, Ohio, said the rise in fraud means everyone should consider the need for cybersecurity insurance as part of their annual checklist. "This is a rider that can be added to most homeowner or renter policies to protect against cyber and identity theft," he said.
While it's less overwhelming to break up your financial checklist into quarterly tasks, Georgia Lord, a certified financial planner at Corbett Road in Brooklyn, New York, said this doesn't mean revamping your annual plan more often. "I stress to clients that a financial plan is a living, breathing document that can and should be reviewed periodically. However, there is such a thing as reviewing or changing your financial plan too often. Typically, once a year is sufficient—or when you have a significant life event such as a large purchase, birth, death in the family, or retirement."
| Task | Description | Tips and Examples |
|---|---|---|
| Create a Personal Financial Inventory | Compile a list of all assets, liabilities, credit utilization, and your credit report. | Include emergency fund, retirement accounts, investment accounts, real estate, and valuables. |
| Set Financial Goals | Divide your goals into short-term, mid-term, and long-term objectives. | Short-term: Establish a budget, emergency fund. Mid-term: Life insurance, home purchase. Long-term: Retirement savings. |
Your financial inventory is important because it gives you a snapshot of the health of your bottom line. The annual self-check-in should include the following:
"We've uncovered life insurance needs as well as opportunities to stop premiums on policies clients no longer need. We've uncovered misaligned investment strategies when their planning needs are reviewed." - Kim Abmeyer
Once you have completed a personal financial inventory, you can move on to setting goals for the next 12 months. You should divide them into short-term, midterm, and long-term goals.
Finally, you can certainly do this on your own, but if you have an advisor, Lord suggested going through your checklist with your advisor. "I enjoy having conversations with clients while going through a checklist. Through this, I am able to hear firsthand any changes to a client's financial goals or circumstances and the nuances within."
These are ways to supplement your income beyond your main job or retirement and Social Security benefits, if retired. Some sources include investing in a rental property and becoming a landlord, which can provide regular income.
A robo-advisor is an automated, online financial planning service that provides algorithm-driven investment management advice with almost no human involvement.
If your finances are relatively simple, you should be fine creating and checking your own list. However, the more complicated your finances are, the more you should consider hiring a tax specialist.
An annual financial plan is an exceptionally valuable tool for maintaining peace of mind about your finances today and in the future. Best-case scenario: You've checked off all the items on this punch list by now. If not, don't hesitate to put time on your calendar to do so.
You'll gain a clear understanding of where your money is going, how much your investments are earning, and how much you're putting away for retirement. You may also find easy ways to save money you wouldn't notice otherwise.
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