Create A Financial Year End Review

    Published: 06-16-2009
    Views: 14,234
    Financial advisor Ric Edelman discusses how to create a year end review for your finances.

    Ric Edelman: This week I am showing you how to complete a year end review of your investments. Let's start by looking at major life changes, marriage divorce, the birth of a child, death of a spouse; anytime you gain or lose a family member, you need to reexamine your investment portfolio. If you are engaged or recently married, you need to talk about how and if you will combine your investments. If you're combining investments decide how you will adjust your asset allocation, so that your difference accounts can all work together.

    If you have a new baby, you have no expenses, including the need to save for college that could impact how you handle your investment strategy. Divorce is another reason to reevaluate your investments. Chances are you will have a lower income and fewer assets after a divorce, and this may cause you to change your retirement plans or other financial goals and that means your investments need to match your new situation. And if you need to make changes, well you might have to, if your spouse has passed away, you might have gained some insurance money or lost some pension income. No matter what you need to examine your investments and make necessary changes. After you consider changes in your family life, you need to look at changes to your income.

    I am not talking about annual pay raises at work; I am talking about big events, like losing a job or getting a big promotion, starting your retirement. If you lose a job, or retire you might need to start generating income from your investment and that could call for a new investment portfolio. On the other hand if you get a big raise or inherit some money, you might need to make changes too.

    Even if you think you have been doing fine, changes in your life means you need to see if you need to make changes in your portfolio that includes your health. A sudden change in health can impact your investment needs in many ways if you have developed a serious illness or a disability, you might not be able to work and that means you might be struggling to get by without a paycheck but your investments can help.

    It's possible to draw an income from your investments to tidy your over. To do this, you will want to adjust your asset allocation there are many ways an illness can impact your portfolio. The thing to do that's important is to think about how it impacts your investments and then, adjust to fit your new circumstances. Maybe it's retirement, or dreams for travel, perhaps you are focused on paying for college or a wedding, maybe you want to start a business. If your plans are changing, your portfolio may need to change too.

    Also consider your attitude about risk, maybe risk bothers you more now than it did before, your portfolio should reflect how you feel right now. Investment changes don't have to be dramatic; you might need to make just small adjustments. But over the years small adjustments can make a big difference which is why it's important that you review your portfolio every year.