Many politicians use an autobiography as a way to market themselves and advance their political careers. It’s a familiar strategy:
- Governor Smith writes an autobiography.
- The Governor promotes the book on radio and TV talk shows, in magazines and podcasts. He hits the road for book signings.
- Governor Smith gets exposure for his next politician campaign.
It’s inevitable that some details in the book will be disputed. We’re seeing this in November of 2015 with Ben Carson in particular. In reality, these disputes have gone on for decades with politicians of both parties. Was the politician misleading us- or did he simply not remember the details when he wrote the book?
This reminded me of another question: do you remember why you made certain investments decisions? What was your original investment goal, anyway?
Where you were, where you are now
The answers to these investing questions are critical. The investment community spends a great deal of time telling consumers to set savings and investing goals- and that’s important. Some firms also talk about having a conversation with your investment advisor each year, which is also great. Oftentimes, this is positioned as an “annual checkup” or review.
But there are reasons why that annual review never takes place:
- The financial advisor doesn’t have a system set up to plan for reviews.
- The advisor asks clients if they want a review- and the customer declines
- You invest primarily on your own and don’t use an advisor.
How would your annual review go?
Let’s take action on that review right now. Take out a pen and a piece of paper (In grade school, my teachers always said: “A pen and paper”). Write down three reasons why you’re investing. Try to make it specific. Let’s assume that you’re 40 years old. You own a home and have young children. Here’s what you jot down:
- Pay off home by age 60
- Fund college for two children (9 years and 5 years old)
- Plan your personal finances to put 5% of your after-tax income in savings
- Take full advantage of your company’s matching program for funding retirement. You invest 3% into your retirement, and your employer matches it.
How’s it going?
If those are the goals, how’s it going? Now, some of that assessment is easy. You can certainly check your bank account and see if you’re meeting your savings goal. In the same way, you can review your retirement plan statements and verify the investing match.
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But let’s dig deeper. Your plan is not just about the total dollars going into investments. Planning should also include the specific investments you’re choosing. Let’s think about funding college education for children:
You can potentially take advantage of your state’s IRS Section 529 plan (or simply “529 Plan). These plans allow you to invest with some tax advantages. All good. But consider the investments you’re choosing with the plan.
If you’re children are young, you have a longer time horizon to invest for college- maybe 10 years or longer. Since the time horizon is longer, you might consider taking more risk by investing in equity securities. Stocks offer the potential for a higher gain. You’re taking more risk- but you have time to recover from any market downturns.
Getting back on track
If you’re not on track, your annual review is a great time to right the ship and straighten things out. I’ve written recently about several steps to take:
- Understand beta– and how beta impacts the volatility of your investments.
- Consider the objective of your mutual fund- and if the manager is making changes that are allowed, but change your fund’s performance.
- Think about the year-end impact of taxes
Mark your calendar
If you invest primarily on your own, conduct your own annual review. Simply mark your calendar or set up a reminder on your laptop or mobile device. Take a look at your investments at least annually. The review will help you stay on track and have peace of mind.
Have used any of these tools? I’d love to hear from you.
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(website and blog) http://www.accountingaccidentally.com/
(you tube channel) kenboydstl
Image: Damien Smith, Towards the podium (CC BY-SA 2.0)