As we enter another year, it’s a prudent time to take proactive steps in managing financial health. Whether you’re retired, planning for retirement, or simply wanting to stay financially fit, aligning your finances is as important as maintaining your physical well-being. Here are five steps to help keep your financial life in order and help find peace of mind in the year ahead.

1. Organize Your Financial Life into One Place

Start by consolidating your financial documents and information in one easily accessible place. This could mean using a digital tool or creating a well-organized filing system at home. Gather records of bank accounts, investment portfolios, insurance policies, and other financial assets. Maintaining a clear view of your financial landscape helps reduce stress, ensures that nothing is overlooked, and makes it easier for you—or your loved ones—to navigate finances in the future. An organized financial life is not only empowering, but it also sets the stage for effective planning and decision-making.

2. Revisit or Establish Your Estate Plan

Having an estate plan is crucial, yet many people either overlook this step or fail to update their plans regularly. If you already have an estate plan, review it to ensure it aligns with your current wishes and reflects any life changes, such as new grandchildren, changes in marital status, or significant shifts in your financial situation. If you don’t have an estate plan, now is the perfect time to create one. An estate plan typically includes a will, a trust if applicable, power of attorney, and a healthcare directive. This ensures your assets are distributed according to your desires and that you and your loved ones are cared for, avoiding legal complications.

3. Review Income and Expenses

Keeping a close eye on your cash flow is essential, particularly as you approach or live through retirement. Take time to review all sources of income, such as pensions, Social Security, investment dividends and interest income, against your monthly and annual expenses. This analysis helps you identify potential savings opportunities or unnecessary expenditures that could be trimmed. An accurate understanding of your cash flow is fundamental to making adjustments and ensuring you have enough to support your lifestyle comfortably. Regularly reviewing your budget can also help you adjust to any unforeseen financial challenges that may arise.

4. Review Emergency Reserve Needs

An emergency fund is your financial safety net for unexpected events like medical bills, home repairs, or sudden travel needs. If your emergency reserves have dwindled or were used up during the past year, prioritize replenishing them. For those aged fifty and older, financial security becomes even more critical, as it helps prevent tapping into long-term investments or retirement funds prematurely. A good rule of thumb is to have at least three to six months worth of living expenses set aside. Reviewing and reinforcing your emergency reserve can protect your financial health and provide confidence as you navigate life’s uncertainties.

5. Review Investment Allocations

Market conditions and life circumstances change, so your investment portfolio shouldn’t be static. Take time to review your current investment allocations to ensure they match your financial goals and risk tolerance in addition to working cohesively with your income and tax plans. As you grow older, it’s generally wise to shift your investments toward more conservative options to safeguard against market volatility. However, that doesn’t mean eliminating growth assets altogether. Speak with a financial advisor to assess your current portfolio and make adjustments that align with your stage of life and long-term objectives. Diversified and well-aligned investments can provide both security and growth potential as you move forward.

As a word of caution though, the dynamics of diversification have changed significantly in the last several years. Thoughtfully consider what diversification you believe you may have in your portfolio. Traditional advice may not deliver the same diversification it has delivered over the last couple of decades. 

In conclusion, maintaining financial alignment is as vital as staying physically active and mentally engaged. By taking these five steps—organizing your finances, revisiting your estate plan, reviewing income and expenses, bolstering your emergency fund, and reassessing your investment allocations—you can create a more secure and stress-free financial future. Remember, it’s never too late to bring your financial life into focus and take control of your well-being.

Information presented is for your educational purposes only and should not be regarded as a complete analysis of the subjects discussed.  Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information.  A professional advisor should be consulted before implementing any of the options presented.

Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.