annual review retirement planning San Antonio PAX Financial Group

Why a Financial Checkup is So Important for Good Retirement Planning San Antonio

retirement, holistic financial planning, PIVOT, Financial Planning Feb 4th, 2019 by: Darryl Lyons

A new year is always a good time to review your finances. When doing so, we recommend a financial checkup of your investments with your financial advisor as well as a personal budget review with your spouse, your family and/or yourself. This is a crucial step to good retirement planning San Antonio.

Frankly, reviewing investments more than annually is an exercise in futility that only leads to anxiety. Be sure to check, however, at least once a year that you are performing well relative to your personal goals and expectations; the risk you are taking; and the overall markets. As always, don’t make any knee-jerk decisions to change things up. If you’re disappointed, make a note and pay attention to see if the disappointments become a trend.

If you can’t wait a whole year, I feel that the most frequent you should review your long-term investment plan is quarterly. Watching daily can lead to emotional buys and sells that result in permanent investment losses.

On the other hand, you should also not just put inflation increases on autopilot, like many people do without any real thought. Instead, re-examine annually. Update your budget, review your plan and decide if a pay increase is needed. If not, let the pay increase keep working for you in an investment portfolio.

 

The Checkup

Annual checkups increase the probability of financial success and reaching your retirement planning goals.

When doing this financial checkup, there are 5 specific things that you should evaluate:

 

1. Net Worth

Has your net worth grown since the last time you took a snapshot? Net worth is defined by assets minus liabilities. In the past year, your assets should have grown by saving and making good investments and/or reduced your liabilities by paying down debt. There should be a trend in a positive direction.

 

2. Insurance Coverage

Do you have the adequate amount of life insurance, health insurance, disability insurance and identity theft coverage? The amounts and types can change based on your income and obligations changing. Also, the insurance companies periodically change product types and actuarial tables, so you may be able to acquire new coverage types or reduce costs. Some financial advisors, like those at PAX Financial Group, can help you with your coverage questions and needs.

 

3. Spending

It isn’t uncommon that as your income goes up, so do your expenses. Take a pulse and see if your spending habits are getting out of control. Look at last year’s spending and place your purchases into major categories, such as food, housing, medical, dining and entertainment, to name a few. If you’re working with a financial advisor, ask him or her to review the categories of spending relative to your income. Identify if there is overspending or opportunities to apply a degree of restraint going forward.

 

4. Professional Relationships

While you’re reviewing your finances, you may also want to consider whether you have the right accountants, attorneys, insurance agents and other professionals to guide you? Maybe your complexity has outgrown their competency. Or maybe the professional’s business model has evolved to where their team can no longer meet your needs. The sooner you realize that a change may be needed, the sooner you can replace a professional you no longer need.

 

5. Investment Performance

I know life is busy, but if you fail to get professional financial checkups every year, you are being irresponsible with your money. If you have partnered with the right financial advisor, the conversation can be enjoyable, insightful and worth the effort. (In fact, the right financial advisor should offer a review without you having to ask for one.) It just takes a little time. Hopefully, this regular maintenance helps you prevent tax issues and other financial problems that can arise.

 

Want to talk with a financial advisor about your financial situation? Contact PAX Financial Group to see how we can help.

 

Investment Performance

Consider this: 

Today, Jack and Jill each have wealth of $5 million. Yesterday, Jack had $1 million and Jill had $9 million. Are they equally happy? There is no right answer, but this question has psychologists buzzing with research, surveys and test groups.

There is one thing that’s clear: Emotions and money are not independent of each other.

Unfortunately, monthly investment statements deliver more than just investment numbers. They can also deliver emotions tied to losses and gains.

Again, I suggest not looking at these performance statements too often. Here’s why:

In a study performed by behavioral finance expert Richard Thaler, two groups were given hypothetical portfolios. One group received performance feedback monthly, while the other group received performance feedback annually. The monthly group received negative reports 39 percent of the time. While the annual group received negative reports 14 percent of the time.

When Thaler asked the participants at the end of the study, “How would you invest your money?”, the monthly group said they would only put 40 percent of their money in stocks while the annual group said they would put 70 percent of their money in stocks.

In other words, the monthly group became timid only because of the amount of information they received. This fear deceived them and impacted their investment approach.

There are two practical ways you can avoid being deceived by your investment statements.

First, don’t reference the high-water mark in your investments every time you gaze at a statement. Don’t say, “It was at $100,000 last month and now it’s down to $90,000. It’s a trend! I’m losing money!”

High-water marks are nice, but they should not be the permanent point of reference. Our team at PAX Financial Group often takes clients back to their initial investment so they are reminded of the starting point in their investment journey.

Second, I say this again, check on your investments less frequently. The most frequent you should review your long-term investment plan is quarterly.

If you follow these two simple rules you can minimize the risk of your statements mixing your money with your emotions, which is never a good thing, especially as the time to PIVOT into retirement gets closer.

 

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This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.

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