In a year when wellness is a topic close to our hearts, it’s a good time to assess our financial health to see if we could make improvements. People often focus on their finances when life changes occur or tragedy strikes – but much like an annual checkup with your doctor, it’s important to be proactive by reviewing your finances each year rather than take a reactive approach. In over 30 years of practice, we have witnessed firsthand the impact of a person’s financial health on relationships, marriages and businesses.
The decisions you make today will matter tomorrow. So let us help you get started on the path to financial health and security by avoiding some common mistakes people often make.
1. Not having a financial security plan. Just like maintaining our physical health, our financial health requires a plan. Like an effective personal trainer, an effective financial advisor must be an excellent listener and a motivator. A plan will always start with identifying your goals, vision, and values to craft a plan that will work for your life and keep you on track. It is often said that planning is good, but doing is better. Find an advisor who will listen to you, motivate you, and serve as an accountable partner to keep you committed to your goals.
2. Examine investments and insurance separately. When looking for a financial advisor, understand something, there are companies that only plan with insurance and companies that only specialize in investments. While this works in theory, it’s not the best approach when developing a long-term plan. Find a financial advisor who can incorporate both into your long-term and short-term plan. Ask if the advisor is a fiduciary, you’ll want to make sure they’re working in your best interest before you hire them. Some advisors can build a plan for a flat fee that you can take anywhere to execute it, while others will just sell you products without building a plan. Beware of anyone who you believe is selling a product on an integrated plan.
3. Not collaborating with other advisors. When engaging with a financial planner, ask them how they typically work with accountants and lawyers to develop and execute financial plans. A valuable advisor will have trusted professional contacts that they often work with. This is to ensure that there are no missed opportunities or mistakes made during planning. For example, your tax advisor should review your plan annually to ensure that you are as tax efficient as possible. They will also be a key advisor when planning for retirement to determine where your income streams will come from to meet your lifestyle needs for the year. Your lawyer will ensure that your estate plan and wills are updated as your life changes and that your financial advisor has a copy in case of an emergency.
4. Forgetting who will impact your planning. Planning can have many levels of impact, so it’s important that you plan to think multi-generationally and beyond your lifetime. For example, if you are a business owner, your plan should answer questions such as: who is next to run your business? Do you have any funding in place in the event of a tragedy? Do you have a purchase/sale agreement in place? If you are planning personally, you will have to take your family through a “financial fire drill”. This exercise will give family members clarity on the plan, key emergency contacts, who is designated to carry out the plan if you are unable to, and any gaps in your plan that may need attention. Often people focus on executing their plan but fail to communicate instructions to their family and those who will be affected by the plan.
5. Not reviewing your plan annually. As life progresses, things change – and so does your plan. It’s important to be proactive when planning and set aside time to review your plan each year. Communicate clearly with your financial advisor how often you want to review your plan. A trusted advisor should suggest annual check-in and hold you accountable to that cadence. The planning never ends, it’s not a destination – it’s a journey.
Just like physical health, financial health requires a proactive approach. Surround yourself with professionals who will hold you accountable to your plan, integrate insurance and investments into one plan, and help take your plan to the next level of impact. The time you invest in your financial health will have a direct impact on those around you. Make planning a priority, review your plan annually, and work with trusted professionals to help you stay on track. Remember to enjoy the journey and let your family be part of the journey.
Northwestern Mutual is the trading name of The Northwestern Mutual Life Insurance Company (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries, including Northwestern Mutual Investment Services, LLC (NMIS) (Investment Brokerage Services), Registered Investment Adviser, Dealer and Member of FINRA and SIPC, and Northwestern Mutual Wealth Management Company® (NMWMC) (Investment Advisory and Fiduciary Services), a federal savings bank. NM and its affiliates are in Milwaukee, WI.
Matthew Robert Carothers uses Greater Horizon Financial Group as a trade name to do business as a representative of Northwestern Mutual. Greater Horizon Financial Group is not a registered investment adviser, broker, insurance agency or federal savings bank. Matthew Robert Carothers is an insurance agent for NM and NLTC. Investment brokerage services provided as a registered representative of NMIS. Investment advisory services provided as an adviser to NMWMC.