Now that another year is ending, it’s a good time to take stock of where you are on your journey toward financial security. Of course, you could find many different “measuring sticks” to assess your progress, but you can certainly gain considerable information just by asking yourself some basic questions.
Here are a few to consider:
• How close am I to my retirement goals? Your comprehensive investment strategy should include a reasonably good estimate of how much money you will eventually need to sustain the retirement lifestyle you’ve envisioned. At least once a year, you should evaluate how much closer you’ve gotten to your goals than the year before.
• Am I making sufficient progress toward my goals? When assessing your progress, try to determine if your portfolio is properly allocated between stocks, stock-based vehicles, bonds, government securities, certificates of deposit and other investments. If you’re “overweighted” in a particular asset class, such as cash, you may be impeding your ability to move toward your goals.
• Am I adhering to my investment strategy? To stick with your investment strategy, you need to invest at regular intervals and meet regularly with your financial professional to review your progress and make adjustments – such as rebalancing your portfolio – when necessary. Of course, even with regular progress reviews and portfolio rebalancing, it can be challenging, psychologically and emotionally, to stick with a strategy. For example, during any given year the financial markets could be down, and your results might be disappointing. Nonetheless, if you have built a diversified portfolio containing quality investments, and your portfolio is well suited to your own risk tolerance and time horizon, you don’t necessarily need to make changes following a down year in the markets.
• What aspects of my life have changed in the past year? Your investment strategy should be based entirely on your individual needs and circumstances – so if these have changed during the past year, you may also have to adjust the way you invest. Consider any and all changes in your life – marriage, new children, divorce, remarriage, new job, new home, etc. – and then try to determine what impact these changes might have on your long-term financial strategy and if you need to adjust that strategy in response.
• Have I changed my thinking on my retirement goals? Over time, you might undergo some changes in your thinking about retirement. For example, perhaps you’ve decided that you no longer want to retire early and travel the world; instead, you’ve discovered a growing desire to open a small business or do some consulting. Any significant changes you make to your retirement plans will likely have a big effect on your savings and investment strategies, so you’ll want to incorporate these changes into your planning as soon as possible.
By asking, and answering, these questions at the end of each year, you should always have a good sense of where you are in pursuit of your long-term goals – and what you need to do to bring the realization of those goals closer to reality.
Marisa Otto, CFP® is your local Certified Financial Planner™ for Edward Jones, and has been helping families and businesses for more than 10 years build and managed wealth. She can be reached at (408) 778-4400 or by email at
ma*********@ed*********.com
. Her office is located at 275 Tennant Ave. Ste. 206A Morgan Hill.
