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7 Tips for an Effective Financial Check-in

| January 12, 2023

The start of a new year is the perfect time to review and set goals. Whether it’s reducing debt, changing jobs, planning for retirement, or buying a new home, personal finances play a role in meeting your goals. A financial check-in creates an opportunity to review how you are meeting your needs and goals. 

Here are some tips for getting the most out of your financial check-in.

  1. Set the stage

Setting the stage for your financial check-in involves ironing out the details of the actual check-in. Where will you have your financial check-in? Many clients we talk to have their financial check-in over a planned dinner or glass of wine. If that is your style, check out the digital version of our RMR Recipe book for some great dinner recipes and wine recommendations. No matter where you choose to do your financial check-in, be intentional about setting the stage. Make sure to limit distractions and keep the atmosphere focused but stress-free. The goal is to get a picture of your current financial situation for your future goals, not to stress over your situation or future outcomes. If you find it difficult to do your financial check-in without stressing, reach out to your future RMR advisor.

  1. Identify your Goals

It is important to know what goals you are trying to achieve before you start your check-in. Categorize your goals into short-term (1 year or less), intermediate (3 to 5 years), and long-term (5+ years) goals. Prioritize the goals in each category by needs, wants, and wishes. Next to each goal, identify why that goal is important to you. You likely have competing goals between categories and priority levels. Your future RMR advisor can help you balance your goals and work with you to create a plan. If you are doing a financial check-in as a couple, complete the goals exercises separately. Doing this exercise separately allows you to uncover goals that are important to your significant other that you may not have been aware of. 

Here is an example of a goals exercise:

  1. Important Documents

There are important financial documents you will need to get the most out of your financial check-in. Your future RMR advisor can help you create these documents. The most essential documents are:

  1. Budgeting

A budget is a tool designed to track where your money goes. It is critical in understanding how to reach goals. By using a budget, you can determine how income and assets are being used to cover current expenses or fund a future goal.  A budget provides insight into spending patterns that may show wasteful or misallocated spending that will hinder your progress toward meeting a goal.  Accurate cash flow planning requires a realistic budget.

Don’t like budgeting? Your future RMR advisor can help you create a budget!

  1. Net worth Statement

Your Net Worth Statement is an important aspect of your financial check-in. A personal net worth statement shows your net worth, which is your assets minus your liabilities. This gives you a clear picture of your overall financial situation. At RMR Wealth Builders, we utilize eMoney, a software that will provide you with a detailed net worth statement. We will work with you to make sure your net worth statement includes all relevant information. We can also illustrate how life events will impact your net worth.

  1. Cash Flow Planning

Cash flow planning is the foundation for financial planning. It helps you to understand if/when you can meet the goals that you have set. Accounting for annual expenses and the cost of goals in the future, cash flow planning reveals the true impact of the decisions we make. By showing how asset allocation adjusts due to withdrawals—and the tax implications of those withdrawals—advisors can more accurately assess client outcomes for each year and over time.

With cash flow planning, you can better determine where money went and where it will go to fund life goals. Cash flow planning can be used at any life stage: early accumulators, midcareer accumurmlators, pre-retirees, and retirees. Your future RMR advisor can create a cash flow statement that provides a clear picture to make more informed decisions. This provides insight into the answers you need when you have competing goals, are going through a life transition, or are preparing for a major life event (e.g., retirement, newborn, or starting a business).

  1. Create a Plan with your future RMR advisor

RMR has a team of seven CFP® Professionals who will work with you to create a financial plan. A Comprehensive financial planning engagement gives you a roadmap of your financial future utilizing scenario-based planning. We compare your base case to a variety of alternative options and stress test them to determine a path to improve your chances of a safe and secure retirement. Through this exercise, we can model scenarios such as downsizing your home, increases in travel costs, a long-term care event, moving to another state in retirement, and more.

A comprehensive financial plan is a written document, signed off on by our Director of Financial    Planning who is a CERTIFIED FINANCIAL PLANNER™ Professional, that you own and can choose how to implement. You can retain RMR to assist you in this process and be your advisor or implement it on your own.

Reach out to your future RMR advisor to schedule a time to talk about creating a financial plan.