How to Get a Fresh Look at Your Finances: Because "That's the Way I've Always Done It" is a Silent Killer

Have you ever heard the story of the grandma, the little girl and the pot roast? 

A little girl watches as her mom cuts off both ends of a chuck roast before she puts it into the roasting pan. 

Watching her mom throw both ends of the roast away, the little girl says to her mom, "Why do you cut off both ends of the roast? That seems wasteful."

Her mom replies, "I don't know, that's the way Grandma always did it. Why don't you call her and ask?"

The little girl dials up her grandma, who lives a few hours away. "Grandma, Mommy said you used to cut the ends off your roast before you put it in the pan, and Mommy does, too. I wondered if there was a reason."

"Dear," replied the grandma. "I cut the ends off so it would fit in the pan!"

Taking the "If it ain't broke, don't fix it" approach in business is like being Blockbuster before Netflix came along. 

However, the same goes for your finances. You don't want to think it's okay to mosey along with your same "tried-and-true" investments without taking a deep look. 

Reasons You Shouldn't Say "Because We've Always Done it This Way" with Your Finances

Why is it so dangerous to say "because I/we've always done it this way"? Let's find out.

Reason 1: You age. 

If you've set up your 401(k) a certain way or have set it to match the needs of your twenty-something self, it deserves a check-up, especially if you're now 45. You shouldn't keep the same investment approach at every stage in your life. You'll want to hit the breaks if you have invested in risky investments and are now reaching retirement age, for example. 

On the other hand, if you're 25 and have a portfolio heavily invested in bonds, you're not being fair to your future self. 

While these are extreme examples, you still want to count your years until retirement into your 

Reason 2: Your risk profile might change.

You might think this has to do with age — that your risk profile might change based on your age. However, that's not necessarily true. What is risk tolerance? It refers to the amount of risk you're willing to take in your portfolio and it might not have anything to do with your age. It could relate to your changing personal preferences. For example, let's say you have always invested in 100% stocks, but then your wife gets sick and you want more of a guarantee that your money will be protected in case you need it. You may want to decrease your riskier investments and go for more conservative investment options. 

Reason 3: You may never have taken a comprehensive look at your investments.

Have you ever really dove into your investments and understood them, front to back? Do you understand the fees and all the details about each type of investment you have? Do you understand your current asset allocation? It's possible that you have no idea what kind of investments you have, how they're performing and, well, you maybe won't know much about them at all. That's okay. Many people fall into the same boat because the details escape them. 

No worries — just get going on figuring out the details now. 

Ways to Get a Fresh Look at Your Finances

Sometimes you just need a different perspective in order to get a fresh look. If you're feeling a little stuck with your investments or feel like you need to shake it up a little, take a look at these tips. 

Tip 1: Talk to a financial advisor.

Getting help from someone else can always give you a great perspective because they might see things that have escaped you completely. For example, they may help you realize that you need more liquid assets, that you've spent way too much time building up your nest egg and that you're neglecting your short-term goals.

Make sure you work with a financial advisor who is a fiduciary, which means that he or she will have your best interests at heart. In addition, ask about this individual's credentials and how he or she gets paid.

Tip 2: Talk to your workplace 401(k) advisor.

You know those sign-up times your company emails you about to talk to your work 401(k) advisor? Take advantage of those. These individuals know your company 401(k) inside and out and can advise you how to invest based on your age and risk tolerance. 

Tip 3: Set specific review dates aside.

If you don’t trust yourself to remember to revisit your investments on a quarterly or at least a yearly basis, pay your quarterly taxes or even pay your mortgage, put dates on your calendar in advance or set up appointment reminders. Treating "taking a fresh look" at your finances the same way you would a dentist appointment may force you to pay more attention to it. You can also tie these specific review dates into a meeting with a financial advisor if that's how you plan to review. 

Tip 4: Take a look at your net worth.

You must — you must! — know your net worth. Kind of like not knowing what your retirement accounts have been doing for the last 10 years, not knowing your net worth might affect you negatively. You should 100% understand your net worth at several points in your lifetime — not just when you get ready for retirement. In fact, go figure out your net worth right now. Calculate your assets, including your home and other items, like vintage cars, and subtract your debt. 

Get a Fresh Overview

Like the mom who never found out exactly why her mother cut the ends off the roast, don't stick to "the way you've always invested."

You want to make sure you know what's happening with your investments and your net worth. Look for ways to improve your situation.