Do you care more about your car than your financial future?
Written by Stephen Bottomley on August 22, 2018.
I bet your car gets a regular annual service to ensure that it is in tip top condition. It’s not surprising that most of us take the time to look after our vehicles which are, after all, assets which cost us thousands of dollars.
Yet how often do you give your investments the once over to ensure they are financially fit? At Infinity this is something that we do for all our clients on a regular basis although we know from what our new clients tell us that this is not always the case elsewhere. In fact, the majority of people probably review their investments less often than they get their car serviced. That’s crazy as we are talking about valuable assets which will have a much greater impact on your life than a car breaking down.
Your financial goals will change year to year as your career and earnings progress but also as your situation changes. Key life events, such as getting married, having a child or coming into an inheritance, will necessitate a review of your financial situation and may require you to set new goals and make additional investments.
Even if there are no significant changes in your life, it is important to regularly review the assets you have, the amount you are saving and how your investments are performing to work out if your current savings and investment plans will deliver for your future requirements. Regular views will enable you to flag issues and take any necessary action.
So is it time to carry out an investment MOT of your portfolios, and how do you go about it? These are the three main areas that we usually look at in our reviews:
Firstly, do you have a monthly savings plan? Prioritising saving is one of the foundations of a sound financial plan which is why I recommend a regular savings plan for my clients. This encourages disciplined saving, enables clients to benefit from the power of compounding and reduces exposure to falling markets as you are not investing all your money on the same day at the same price.
Secondly, are you saving enough? The amount you are putting aside each month should be regularly reviewed to make sure it is sufficient to meet your changing future financial needs, especially if you are climbing the career ladder with regular salary increases and an expanding lifestyle to match. You don’t want to have to make lifestyle compromises when you retire because you have failed to revise your goals and savings upwards.
Several factors need to be reviewed during a portfolio check:
• Has your risk profile changed?
• Does your asset allocation need to be rebalanced?
• Are there any external factors affecting your portfolio such as interest rates, fiscal policy, regulations and political stability?
While a buy-and-hold approach is often best for long term investors, ignoring blips in the market, it is important to stay in synch with market conditions. A portfolio can be protected against downside volatility with active management although this is definitely a job for professionals. That’s why we leave the investment management of our client portfolios to the experts at Tilney who are able to respond with agility if they foresee problems such as faltering global growth which might be a sign to rebalance offloading equities for less vulnerable bonds.
Wealth creation and wealth protection must go hand in hand if you are serious about your finances. That is why you should should review all your insurance policies, including life, health and critical illness cover, every year, to make sure your needs continue to be met. This is also a useful exercise to check that you are getting good value-for-money. There may be less expensive products in the marketplace or ones which better suit your requirements.
If you feel that your finances have been neglected it could be a sign that you should switch adviser. Or if you have been trying to go it alone but are finding the process daunting, perhaps some expert help is what you need. You wouldn’t service your car yourself so why try and assess your financial health alone?
Whatever your situation, if you have any doubts about the fitness of your finances why not contact me at firstname.lastname@example.org or +60 12 916 3750 for a free financial MOT today?