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Time for Your Annual (Financial) Wellness Screening

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December 30, 2016
Managing financial earnings and investment portfolios.
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Have you had your annual wellness screening? You know, the one where you (along with a professional) take a look inside, check the vitals for any imbalances, and compare the results to last year's numbers and those typical for your age group? Sounds like a medical checkup...or a financial one.

Here are a few things to consider as you assess your financial health:

  • Set up an automatic savings plan for regular contributions.
  • Revisit your goals and ensure you have a plan in place.
  • Rebalance your stock and bond allocations.
  • Review your risk level and explore income options.
  • Stay the course and use discipline.

Dara Luber, senior manager, retirement, at TD Ameritrade, says it's important to review periodically, to ensure your goals and objectives, risk tolerance and time horizons are where you would like them to be. 

And now for this year's checkup. If you're like many people, the diagnosis and suggested remedy for financial health may be the same as it is for physical health: Develop good habits, including an exercise regime and a healthy diet.

Kick this Habit

Is the amount of money you save each month determined by how much money you have left after you've paid the bills? That may be a tough habit to break. After all, many discretionary spending items start out as “splurges” (think restaurants, vacations, designer clothing and designer coffee) and slowly become mandatory “must-haves” over time.

What if you were to turn that thinking on its head, and "pay yourself first?" Sure, you'll need to settle the basic living expenses— housing, transportation, food and such— but you should be making regular contributions to your savings and retirement accounts, and many financial professionals say this spending should jump the queue. Worried you won't be able to stick to it? Most banks and brokerages will let you set up automated deposits.

If you’re like most people, you are at times juggling several priorities at once, each of which seems to take precedence in the short-term. "I'll pay extra into my savings next month," you say. But do you follow through?  If you think of saving for your future as a mandatory item that takes priority over certain discretionary items, you may be surprised as to how much you can save.

Develop Your Exercise Routine

Luber says, in fitness as well as finances, the key is to make small, measurable goals and stick to them. "Instead of saying, I’m going to go to the gym every day and run a marathon this year, I would make it a goal to go to the gym 3 times a week and eat a salad for lunch Monday through Friday," she says. "The same could be true for your finances.  Don’t set lofty goals that are unrealistic. Instead, start out the year saving $25 or $50 a month." 

There's nothing wrong with the occasional splurge. In fact, these types of rewards can help keep you on course. The trick is to keep at it until it becomes part of your routine. Like the fitness enthusiast who feels a bit of a buzz from a good workout, you can eventually feel that same sense of accomplishment as your account balance grows.

Again, it comes down to priorities. If you build time into your life to work on your financial priorities, much as you build time into your schedule to fit in a workout, you may gain better control of your financial fitness.

Go on a (Spending) Diet

But what if you feel you are barely making it with your current household cash flow? Perhaps you are treading water for a few months, but then a child's tuition bill comes due, or it's tax season?  Well, first of all, those expenses aren't unexpected, so they should be in your budget. And for unexpected events, such as a temporary unpaid leave of absence from your job or a furnace that conks out just after the warranty expires, that's why you have an emergency fund—3-6 months' living expenses in a liquid account. For additional information on budgets and emergency funds, please read this recent primer.  

In general, people can find places to trim the fat in the household budget. And the sooner you begin, the better. Money tends to grow over time, from interest, dividends and, depending on the contents of your portfolio, growth. So where do you start? Luber recommends writing down the top 10 things you spend on every month. "Prioritize those by how happy they make you, and cut the ones that make you the least happy," she says. "Put that into savings."

Just as there are clear short-term and long-term physical benefits associated with a sensible diet, regular exercise and avoiding bad habits, applying this same logic to your finances can help you be financially fit. 

Need Help Managing Your Portfolio?

Get the help you need to pursue your financial goals. Whether you’re new to investing or looking to supplement an existing portfolio, TD Ameritrade Investment Management, LLC offers a suite of managed portfolios to help you manage your money.