Financial Focus for the New Year – January 6, 2008

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Financial Focus for the New Year- January 6, 2008

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC
January 6, 2008

Financial Focus for the New Year
January 6, 2008

With 2007 behind you and 2008 ahead of you, what should your financial focus be?  First, take a moment to assess your financial results for the past year.  Did your financial net worth grow?  And did it grow at an acceptable pace to meet your long-term financial goals?  One of the best tools you can use for this exercise is an Asset/Liability Form.  You can print one out from the Resource Center at  Once you have assessed your progress for 2007, now turn your attention to 2008.  What adjustments do you need to make to make certain 2008 will be a fruitful year?  Here are five suggestions for you to consider:


  1. Guesstimate your target retirement account.  When was the last time you stopped and thought about how much money you’ll need to accumulate to retire?  Here’s a quick test.  Start by visualizing what financial conditions will be different in retirement.  For example, your home mortgage may be paid off.  Making these adjustments, guesstimate how much money, annually, you’ll need to run your lifestyle.  Subtract any sources of retirement income (annually) such as Social Security or company pension.  Multiply your remaining answer by 20.  This will give you a broad estimate of what you need to accumulate in investments.  It may be an eye-popping number, but don’t distress.  See # 2.
  2. Invest more money.  Make it a habit to increase the amount you are investing each year, even if it’s only by a small amount.  Over time, this habit will pay off with multiple rewards.  This is especially true if you have access to a company retirement plan where the company matches part of your contribution such as a 401k plan.  An easy way to find money each year is to use one-half of any pay raises or bonuses to increase your investment program.
  3. Revisit or write your Investment Policy Statement (IPS).  If you have an IPS, look it over and decide if you want to make any broad changes.  On a macro level, your IPS defines your intended allocation between stocks, bonds and cash.  It then further subdivides stocks and bonds into various categories.  For a sample IPS you can use, go to the Resource Center at click on ‘Investment Policy Statement’. 
  4. Rebalance your portfolio.  Once you’re clear on how you want your funds allocated, take the time to rebalance your portfolio using your IPS as your guide.  You should rebalance at least once per year; more often if there are significant changes in sectors within your portfolio.  If your target retirement account that you calculated in #1 looks really big, consider increasing your allocation to stocks (#3).  Historically, stock returns are about double that of bonds over long periods of time.
  5. Check your beneficiaries.  Even if you ‘know’ the beneficiary of your retirement plans are right, check them anyway.  I have seen way too many mistakes made where someone passed away and the beneficiary was wrong.  These situations can be nearly impossible to correct.  I’ve also seen cases where companies lose the documentation.  Take a moment, double check.


A little planning at the beginning of each year will go a long way towards achieving your long-term financial goals.