Review Your Finances Now, Before the Frenzy of the Holidays

After summer’s fun and before the frenzy of end-of-year holidays marks the perfect time to review your finances.

First off, this point almost any year sees asset classes that outperformed or underperformed to expectations. So far in 2014:

  • Various stock market indexes are at or near record high levels. The bull market in stocks celebrated its fifth anniversary earlier this year, and in 2014 the Standard & Poor’s 500 Index is up nearly three-fold since its March 2009 lows.
  • Bond funds and exchange-traded funds (ETFs) surprised us with pretty decent returns – contrary to what many expected, especially in the wake of weak performance in 2013.
  • After largely not participating in the strong equity markets of 2013, real estate investment trusts proved a top performing asset class in 2014.
  • Emerging markets equity lost money as an asset class in 2013 and also recovered nicely this year.
  • Small-cap stocks underperformed so far in 2014 after an outstanding 2013.

As far as your own mid-year financial review, whether you plan yourself or work with a financial advisor:

Review your financial plan. Given the robust markets of recent years, this is an opportune moment to assess if:

  • You’re tracking toward your financial goals?
  • Your investment gains put you further ahead than anticipated?
  • It’s time to rethink the level of investment risk in your portfolio?

Review your plan at least annually.

Adjust your 401(k) deferral. If you aren’t on track to defer the maximum allowed ($17,500 or $23,000 if you are 50 or older anytime in 2014), try to up the percentage of your salary deferred. Every little bit helps for retirement.

Rebalance your portfolio. This standard for your financial playbook hinges on how different types of investments perform differently at different times and can tip your overall portfolio out of balance. Too much money allocated to stocks can, for example, cause you to assume more risk than you want.

While reviewing your allocation, make sure you don’t overdo rebalancing. I suggest that 401(k) participants whose plan offers automatic rebalancing set the frequency to every six months. (Rebalancing more frequently might work, though, if market conditions cause your portfolio to be severely misallocated.)

Some investment strategies also call for a more tactical approach. If you use such an approach (perhaps via an ETF strategist), still monitor this manager’s activity to make sure the strategy fits your plan and tolerance for risk.

Review individual investments. As a rule, make few decisions about investments based on short-term results but here are a few questions to nonetheless consider at  mid-year:

  • If you hold individual stocks, where are they in relation to your target sell price?
  • Did your actively managed mutual funds change management personnel?
  • Do any of your mutual funds suffer asset bloat due to solid performance (or perhaps just the greed of the fund company)?
  • Are expense ratios of your index mutual funds and ETFs among the lowest available?
  • Has your company retirement plan added or removed investment options?
  • Is the target date fund option in your 401(k) really the best place for your retirement contributions?

Look at company benefits. Your annual Open Enrollment for employee benefits at is likely coming up soon. This is when you can adjust your various benefits, such as health and dental insurance. Take a look at your benefits’ usage and your family situation as part of your financial review to see if you might need adjustments.

What’s your career status? How’s your current job? Are you on a solid career path? Time for a change, either within your company or with a new employer?

A key question: Do you feel in danger of losing your job? Often companies lay off in the second half of the year. If approached with a buyout offer to leave, do you take it?

For most of us, our job constitutes our major source of income and the vehicle that allows us to save and invest to meet our biggest financial goals. Any time you spend attending to your job status can be productive.

Start a self-employed retirement plan. If self-employed, you need to start planning for your life after work. Two of the most common self-employed retirement plans:

  • The simplified employee pension (SEP) is an individual retirement account allows a contribution up to 25 percent of each employee’s pay and 25 percent of your net self-employment income.
  • The Solo 401(k) is a traditional 401(k) that covers a business owner with no employees and also includes the owner’s spouse.

There are other alternatives as well.

Take time and take stock of your situation at this convenient point. Good advice any time of the year: Failing to plan your financial future is a plan to fail financially.

Follow AdviceIQ on Twitter at @adviceiq.

Written by Roger Wohlner, CFP. Roger Wohlner is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides financial planning and investment advice to individual clients, 401(k) plan sponsors and participants, foundations, and endowments. Please feel free to contact him with your investing and financial planning questions. Check out his Financial Planning and Investment Advice for Individuals page to learn more about his firm’s services. Roger is active on both Twitter and LinkedIn. Check out Roger’s popular blog The Chicago Financial Planner where he writes about issues concerning financial planning, investments, and retirement plans. He is also a regular contributor to the US News Smarter Investor Blog and has been quoted extensively in the financial press including The Wall Street Journal, Forbes and Smart Money. Roger is a member of NAPFA, the largest professional organization for fee-only financial advisors in the country. All NAPFA Registered Advisors sign a fiduciary oath promising to act in the best interests of their clients.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.