Accountability of your Personal Finances

Feb 28, 2023 | Individuals & Families

Building a personal portfolio of valuable assets through hard work and dedication is a truly rewarding process. Once you’ve accumulated enough wealth to gain financial independence and freedom, you might think the hard part is over, but with a diverse portfolio spread across various investment classes, industries, and locations, it’s easy to lose track of where your money is going and how it’s performing. Managing your accumulated assets isn’t just a best practice, it’s a responsibility. Many advisors agree that maintaining accountability of your financial affairs through consolidation and regular review leads to the highest rates of return, optimized tax structure, and integrity of your estate plan.

Consolidated financial data is generally a comprehensive view of all your financial assets and liabilities, and the performance of your investments. Using IRR (internal rate of return) as a common denominator for investment performance allows you to compare investments and flag the low performers as opportunities to improve your portfolio. With the right data, you can get a clear picture of your overall financial health and make informed decisions quickly. Warren Buffet likes to say that the first rule of investing is to not lose money. Do you know how all of your assets have performed this year to date? Most people wait until their quarterly investment statements appear in the mail, and either send them to the shredder or take a quick glance at results that are over a month old. Being agile and informed with your portfolio can make all the difference in beating the S&P, especially in certain alternative asset classes. Through working with a trusted advisor and staying on top of your IRR, your money will work hard for you.

Financial management of your family’s financial affairs can grow to be an ominous task that most avoid until tax season, but by consolidating activity in a financial model, you will keep a pulse on events during the year and reduce the stress of getting caught up. A good advisor can help you construct a comprehensive view of your financial situation and provide tailored estate planning advice based on your unique needs and goals. The challenge is maintaining the integrity of that plan for the next 20+ years! With a healthy mix of revocable trusts, SLATs, GRATs, DAFs, etc., it’s no small task to keep cash flowing properly so not to jeopardize the overall estate plan. It’s often the case that families put estate plans in place and fail to review them over time, which leads to bills being paid from the wrong accounts, and assets inadvertently being transferred between trusts. These types of oversights can crumble even the best estate plans and end up with a very unfavorable tax liability. By regularly reviewing your consolidated financial affairs to include assets and cash flow by an entity, you will decrease the risk of mishap and unwinding of your estate plan.

How we can help

The good news is that managing your family’s finances is not something you need to do alone. With our team, you will have access to industry-leading technology and expertise to make the process seamless, help you make informed decisions, and get the most value out of your estate plan. Our experts know the ins and outs of creating these consolidated models, reviewing estate plans, optimizing tax structure, and working as trusted advisors to many families. Contact us anytime if you’d like to explore this further with one of our professionals.