2011 was a year of ups and downs in the financial world, and while it was upsetting riding the stock market roller coaster, is was even more discomforting to see our personal investments wobble and get out of whack. Making a resolution to join a gym and get back in shape during 2012 is great, but strengthening your financial portfolio for what may well be another year of fluctuation and uncertainty is paramount.
Here are some tips for financial planning in 2012, including some questions to ask your financial advisor about your portfolio’s performance during 2011.
Begin with a full financial evaluation. Reassess your financial goals, your risk level and your portfolio’s diversification. Be direct with your financial advisor and ask whether or not your portfolio actually performed during the previous year.
Discuss what your planner did during 2011 to offset market fluctuations, and ask what he or she will do differently in 2012 to counter for the ups and downs of the fiscal year.
U.S. News has some advice for 2012 financial planning, and here are a few of their recommendations.
Examine your portfolio’s withdrawal rate to ensure that it covers the expenses of survival – such as money for groceries and gas; the mortgage payment; and money to cover necessary bills.
Contribute as much to your retirement savings as financially possible. According to U.S. News, the government made modifications to retirement saving guidelines for 2012: “The IRS recently raised the 2012 contribution limits to $17,000 per year ($22,500 if you’re 50 or older) for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.” And don’t neglect your IRA; you can still save up to $5,000 or $6,000 annually, depending on your age.
As always, reducing debt is a large part of financial planning and preparation. If you’re sitting on copious amounts of debt, start with something manageable, like dissecting your last few bank statements with you financial planner. There are almost always a couple of dollars that can be reallocated to clear out direct debt.
Refocus on risk management and diversification. How much can you stand to lose in order to increase your chances of gain in 2012? And do you and your financial advisor need to shuffle your investments around and re-diversify your portfolio for the coming year? These two things should be evaluated annually, and most likely, changes will be necessary in both areas.
It’s a daunting time to think about your financial future, and although the market is still somewhat volatile, you can give yourself the best chances of fiscal success by working closely with your financial planner. Take action – don’t wait until something goes awry or you’re out of touch with your portfolio’s performance before taking steps to improve it. Start financial planning in 2012 on a proactive note by following a few of these tips.