As you manage a monthly budget, contribute to savings plans, and work toward financial milestones, it’s helpful to pause every now and then to assess your progress and adjust your plan.
That’s where an annual financial review comes in handy. A financial review is an opportunity to take a comprehensive look at your finances, evaluate the success of your various strategies, and determine whether any changes need to be made. This review process is also important because life events and changing priorities and goals can affect your financial strategy, and a financial advisor can help recommend revisions to your plan.
If you’re unfamiliar with conducting an annual financial review, here’s a breakdown of the benefits and how to make the most of this process.
What’s Covered in an Annual Financial Review
An annual financial review offers a comprehensive view of all of your finances—not just your income and expenses, but also your assets, retirement funds, liabilities, home equity, progress toward savings goals, and other important data points.
This process will even take an in-depth look at the status of your various assets and investments, including your overall risk profile, the diversification of your assets, and how that asset allocation is helping or hindering your progress toward financial goals.
As part of this process, you will also review your current financial strategy, including savings goals, retirement timelines, and other important objectives, to determine whether you’re currently on track to reach those goals—or whether changes need to be made.
Additionally, a financial review provides the opportunity to discuss revisions to your plans, such as changing your target retirement date or increasing savings for a child’s college tuition, while making adjustments that help you afford those goals.
Who Conducts the Annual Financial Review?
The best way to conduct an annual financial review is with a trusted financial advisor. Ideally, this will be an advisor who manages or is familiar with your finances, including investments. If you don’t already have a financial advisor, though, you can use the annual financial review as an introduction for both parties, allowing you and your new advisor to discuss your current finances and what financial success looks like to you going forward.
Working with an advisor is preferable to self-conducting this review because advisors offer a depth of knowledge about investment portfolios, asset allocation, and other nuances of financial management that the average person is likely unaware of. They can also be relied upon to discover and recommend financial products and savings tools that are a great fit for you and your family.
How to Prepare for a Financial Review
After scheduling a financial review with your advisor, prepare by gathering the documents and information you need to be well informed at the meeting. This includes statements for various investments and assets, especially assets that aren’t currently managed by your advisor.
Other documents to bring include copies of life insurance policies, estate planning documents, annuity and business contracts, and statements for all of your financial accounts.
Meanwhile, review your current financial strategy and determine whether your previously established priorities still apply. You may have new financial goals you want to target and other goals that could be downgraded in priority. You might also feel that certain financial goals are creating too much of a strain on your finances. Or, by contrast, a pay raise at work may lead you to increase retirement contributions or accelerate timelines for goals currently in-progress.
This is also an excellent time to ask any questions you may have about new savings and investment strategies, as well as questions about your current approach. Take advantage of this opportunity to become better informed about your own finances.
Conducting annual financial reviews is a worthwhile habit that keeps you updated on your financial progress and helps you plan for the future. Whether you’re nearing retirement or just starting your professional career, use this meeting to track your financial progress and set plans to build even more financial success in the future.
Looking for professional advice? Schedule an appointment with a financial expert today.