Fisher Investments UK: 3 Elements of Your Financial Life to Review Annually

If you’ve taken the important step to improve your financial life by setting goals, establishing a budget and developing a robust, long-term financial plan, you’re already ahead of many people. But, your family’s financial plan could use some regular care and maintenance. You should review some aspects of your financial life at least once a year to determine if you’re still on the path to reach your goals, or if you need a slight course correction.

By scheduling a regular assessment of your financial life, you reduce the risk of only reviewing your situation and making financial decisions after things have gone wrong, which could lead to emotionally charged choices that could hamper your chances of reaching your long-term financial goals.

Here are three basic elements of your financial life that you can check at least once a year to make sure you’re still on track.

1. Update your list of assets and liabilities

Your financial life is dynamic and constantly changing, so it’s a good idea to take stock of both sides of your personal financial ledger—assets and liabilities—at least once a year. An annual tally can provide perspective on your current net worth and overall financial health. Plus, when you regularly revisit your financial inventory, it’s harder for valuable retirement accounts, investments or insurance policies to slip through the cracks over the years.

To conduct this review, first look at your cash and other assets to understand all the financial resources available to you. Start with items like your retirement accounts and any other investment accounts or financial trusts. Note account balances and compare your asset allocation—the mix of equities, fixed interest, cash and other securities—against your investment plan to see if you need a rebalance to stay on target. Add any other savings or bank accounts. Whilst you’re at it, make sure the contact information you have for investment and bank accounts is up to date.

Next, tally the values of notable personal property—anything from cars and boats to valuable jewellery or antiques. Also, add in any real estate holdings, including any equity you have in your home. Don’t forget to record your emergency fund—which can be crucial if you encounter a financial emergency like an unplanned home repair or unexpected bill from the veterinarian. If you have credit cards, make a note of your current credit limit to understand the funds that could be available to you in a pinch. You can also include any life insurance policies to incorporate what your estate could be worth.

After reconciling your assets, it’s time to review your debts to understand how much you owe. Start with mortgages, home equity loans or lines of credit. Include any student loans, vehicle loans, outstanding credit card debt or other major loans. As you list out your debt, it can be helpful to note the interest rate for each obligation. If paying down debt is an important financial goal, knowing the interest you’re paying can help you prioritise payments or find refinancing opportunities.

Once you’ve accounted for both assets and liabilities, subtract your debts from your assets to arrive at your net worth. You can use this number to track your financial progress over time.

After you’ve reviewed your financial picture, you should think about any big life changes that could affect your finances. Whether it’s new grandchildren or a new home, many common life events can have big impacts on your financial plan. Here is a list of some common events that might trigger a closer look at your financial priorities.

• Marriage or divorce
• New children or grandchildren
• Job change, loss or promotion
• Buying or selling a home
• Moving
• Retirement status
• Financial emergency
• Death, major illness or medical emergency

Look at these events from the perspective of how they might affect your total financial picture. For your investments, examine whether a life change is cause for an adjustment to your goals and investment time horizon – the time you will need your money to work for you. For example, a new grandchild may give you a new financial priority (paying for a university education) or extend your time horizon (leaving a financial legacy). If you had to tap into your emergency fund to pay for unexpected expenses, consider what you may need to do to replenish those funds.

Also consider how life events may cause you to adjust your beneficiaries or designated persons on financial assets like investment accounts, trusts or insurance policies. If your spouse passes away, for example, you might need to designate your investment assets to pass to a child if anything should happen to you. Similarly, consider how life changes might cause you to adjust your estate plan and how your assets are distributed after your death.

By regularly examining how big life changes might affect your financial plans, you’ll give yourself more opportunity to handle these transitions much more smoothly and avoid emotionally charged financial decisions.

To have the most up-to-date view of your finances, you should have a good understanding of your regular cash flow. That means reviewing any recent or upcoming modifications to your income or expenses. This step is less about staying on budget, and more about determining how any changes could affect your overall financial health. For example, lower income or higher expenses may mean less money to set aside for retirement.

Start by reviewing any changes to regular income sources – anything from your salary to rental income from property holdings. Next, add in any new or expected sources of income. This could include new withdrawals from retirement accounts or income from a new business. Is there more or less income coming in than last year?

Whilst reviewing income is fairly straightforward, updating your expenses is the really valuable part of the exercise. Expenses can add up unexpectedly over time and can be easy to forget. You’ll include big fixed expenses like your mortgage, rent or car payments. Add in estimates for your regular bills and household expenses. Pay particular attention to expenses that aren’t always front of mind, like recurring payments for online streaming services or memberships. These types of expenses often add up quickly; reviewing annually can give you a chance to assess whether you’re using them enough to justify their impact on your budget.

Once you’ve updated your regular income and expenses, you can reassess your budgetary priorities and make adjustments to stay on track toward your financial goals.

Taking the aforementioned steps at least once a year gives you an opportunity to re-evaluate your investment and financial situation with an eye toward future goals and the family and friends who matter the most to you. Fisher Investments UK believes an annual financial review is worth the effort when you think about all the hard work you’ve put into building your wealth. A long-term view of your financial life is important to achieve your goals, but that also requires regular check-ins to help ensure you’re on the right path. You can schedule your annual review at any point throughout the year, but digging in early in the year can often give you the perspective you’ll need to set the tone for the rest of the year.

Interested in planning for your retirement? Get our ongoing insights, starting with The Definitive Guide to Retirement Income.

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Fisher Investments Europe Limited, trading as Fisher Investments UK, is authorised and regulated by the UK Financial Conduct Authority (FCA Number 191609) and is registered in England (Company Number 3850593). Fisher Investments Europe Limited has its registered office at: Level 18, One Canada Square, Canary Wharf, London, E14 5AX, United Kingdom.

Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission. Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.

Investing in equity markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns. International currency fluctuations may result in a higher or lower investment return. This document constitutes the general views of Fisher Investments UK and should not be regarded as personalised investment or tax advice or as a representation of its performance or that of its clients. No assurances are made that Fisher Investments UK will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts will be, as accurate as any contained herein.