Taking Your Annual Financial Pulse

The article was written by Debra Neiman CFP of Entrepreneur.com

An annual financial checkup is the most important part of the financial planning process. Yet many people downplay its significance.

This annual review is an opportunity for you and your financial planner to examine your strategy, or "to do" list, and measure the progress you're making toward your goals.

It's also a time to incorporate any new life changes that have occurred during the past year -- the birth of a child, the death of a loved one, a new marriage, a business startup or expansion, or even a major purchase -- into your financial plan to help you chart a new course, if needed, or to further affirm that you're on the right track. Remember, your life is dynamic, not static, and your financial plan should be as well.

During your annual review, you and your planner will want to revisit the building blocks of your financial plan and review your resources, goals and priorities to see what's changed. This act of monitoring and benchmarking is beneficial because you'll get an opportunity to step back from your busy life, review your goals, and confirm that your priorities remain the same. And you and your planners get the chance to reconnect to affirm that you both are taking the right steps toward goal achievement or to refocus so that you don't get too far off track.

Short-Term Goal Review

In most cases, your first step will be to examine your short-term goals. Here, your planner can recommend strategies that should be considered for time-sensitive objectives. For instance, if you plan to purchase a home sooner rather than later, your planner might suggest putting more aside for the down payment and decreasing what you're putting into your children's college fund just until you buy the house. Or the birth of a child may be the catalyst for your planner to recommend purchasing additional life insurance.