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Why you Should Reassess Your Financial Plan

December 30, 2016

Most people do not spend their entire life working at the same job, or with the same company, without reassessing their position at some point in time. Think of this way, would you keep the same one-bedroom apartment you had as newlyweds when you start having children? Just as you reassess your career and your housing situation, you should also be assessing your financial plan over time. There are numerous reasons for reassessing your financial plan.


 Reassess Your Risk

Any type of investment comes with risk. Your financial advisor can help you determine your own investing nature: a more conservative route allows for a lower risk with favorable rewards, or a more aggressive approach which opens you up to bigger risks with possibly bigger rewards. The more time you must save, the bigger the risks you can afford to take because you have time to recover any losses in the longer run as the market rebounds.


Risk tolerance will change depending on your age. For example, you can afford to be aggressive when you take your first job out of college because you have 40 years of work ahead of you to save, invest, and gain. As you get closer to retirement though, low risk investments that better protect your nest egg are crucial. You will get smaller gains, but they will still be reliable and come with less risk for loss.


Rebalance Portfolios

While it seems ideal to just set your money aside and let it grow, you should rebalance your accounts at least once a year. All 401k accounts are designed with a certain ratio of stocks, bonds, and cash in mind. US News & World Report notes that a portfolio with 70% stocks and 30% bonds can shift on its own throughout the year, for example, on the strength of a good equity market. The result may be an allocation that is now 75% stocks and 25% bonds. Your portfolio is straying towards a strong performer, but when it strays from its target balance it can actually lose you money in the long run.


Leaving 401k accounts to sit untouched still generates savings, but you are missing out on the opportunity for better returns. Quarterly rebalancing of your portfolio can add as much as another half-percent in returns each year. Looking at your allocation is also very important. This refers to the money you have in different classes of retirement funds. Bankrate points out that reallocation may be necessary to ensure that you retain balance.



No matter what stage of life you are in, reassessing your financial plan allows you to step back and be realistic. Each step in your life should feature investments of money you can afford to lose, not amounts that would put you in dire straights financially. The more money you are comfortable losing, the higher your tolerance, as long as it fits your life.


Ask your financial advisor for help in determining which types of allocation come with risks you can tolerate. For example, government bonds and money market accounts are great low risk options, while real estate, high-income bonds, and equity mutual funds bring a more moderate risk.  Contact Manhattan Ridge Advisors for more information.