Regular financial reviews provide you with a chance to ensure your financial decisions continue to reflect your goals and circumstances and to assess if you’re on track.
They could also be a useful way to reduce any potentially damaging knee-jerk decisions you might be thinking about making.
Basic Stuff
Of course, one of the key roles clients employ me to do is to manage their money.
Reviewing performance is a key part of this. You need to know that your money’s heading in the right direction even though, at times it WILL go down!
If you have at least some experience of investing, you’ll know that your ISAs, General Investment Accounts, pensions, etc. go up and down in value but you need to be satisfied that the long-term trend is positive.
So, having an opportunity on how things are going and comparing it with how things were last year can be incredibly useful.
Am I On Track?
There might be things that are important to you:
Can I still retire when I want to?
Am I on track to get rid of the mortgage by a certain age?
Will I continue to have enough income to support my lifestyle into the future?
I’m concerned about care costs later in life. Will I be able to cover them?
Leaving a legacy to my loved ones is important. How do I best do that?
The list can be long but that doesn’t matter. The key thing is to check-in regularly to review / discuss / agree what’s important to you and then to make sure your money’s in the best shape it can be to make it happen.
Of course, you might be way off-track. You might be dreaming! Either way, you need to know. If you’re going to be short, isn’t it a good idea to know by how much and what you can do to bridge the gap?
Avoid ‘Silly’ Decisions
Behavioural bias refers to beliefs or behaviours that unconsciously influence your decisions. It’s something we do every day and it helps us make decisions quickly such as which way we’ll drive into town or what we’ll eat for breakfast.
But these biases can lead to mistakes because you might be basing them on slightly faulty reasoning or emotions rather than facts.
When you’re making big financial decisions, like where to invest a lump sum or how much of your pension to withdraw, eliminating bias can lead to better outcomes.
You might like to take a look at an earlier blog I wrote about investing which takes this sort of thing in to account.
Let’s say you have some money to invest. You overhear people chatting about how they’ve all invested money into a tech company that’s sure to deliver ‘huge returns’ or become the ‘next Google’.
You might feel excited about the opportunity or worried that if you don’t invest right now, you’ll miss out. So, you decide to invest your money based on a bias sometimes referred to as “herd mentality”.
Yet, if you delved deeper or looked at the bigger picture you might find that the investment isn’t right for you. It could be a high-risk investment that doesn’t suit you or the investment time frame isn’t right for your goals.
If you plunged ahead and invested your money without research, you could later find you’ve made a mistake because you’ve acted on bias.
Other Handy Pointers
You might want to know if you need to be taking any action with things. Are changes needed to your arrangements to make them more efficient? Are you still taking the right amount of risk with your money?
Checking in on other areas also adds a lot of value and forms part of your financial MOT:
· Are your wills and powers of attorneys in place / up to date. Do they reflect your current wishes?
· Where do you stand on inheritance tax? Do you want / need to do something about it?
· If you’re taking an income from your money, are you still doing it in the best way?
· What about care in older age? Is this something you might want to address?
· Should we be reviewing the nature of our relationship? Are we still happy working together?
This is all useful stuff. By the end of the review, you should feel clearer and more confident about things along with fully understanding what action you might want to be taking.
Helpful?
I hope this has been useful for you. There’s quite a lot that goes into an annual review (or planning meeting as I call them) but, more importantly, there’s lots you’ll get out of it as well.
Let me know if you have any questions and feel free to visit my website, otherwise, I’ll see you next time!...