The new year is the best time to reassess and set new goals. What do you imagine for your future? What are your goals for 2023?
In an effort to make “financial wellness” more than just a phrase you hear when you visit your financial advisor, we put together 12 steps to help you improve how you handle your money.
January – Start the new year by reviewing your relationship with money – what impact do your beliefs about money have on the way you save and/or spend? Are you comfortable talking about money with friends and family or do you only discuss your financial situation with a financial professional? While it’s not necessary to share the contents of your portfolio with the stranger at the salad bar, it is healthy to have honest conversations with people who can guide you in your decisions about money.
February – Take the Frugal February challenge! Make it a “buy nothing new” month. For 28 days, make your own coffee in the morning, pack your lunch, borrow books from the library, and check online groups to find “like new” items at discounted prices.
March –Creating a budget is an exercise in discipline but you can start simple by listing your income and your expenses (both cash and credit) and then committing to tracking both for the month. You can go old school and track on paper, or you can use a spreadsheet, or you can use an app. There’s a way for everyone, at every level, to get this done. While you’re being disciplined, get your taxes done early and avoid the stress of waiting until the last minute.
April –April is Financial Literacy month. Do you know your net worth? If not, it’s easy to calculate it by listing your assets and liabilities and then subtract. Why do you need to know your net worth? Well, knowing this piece of information can help you identify areas where you may be spending too much money. Just because you can afford something doesn’t mean you have to buy it! Knowing your net worth, and tracking it over time, is a helpful indicator of your financial stability.
By the way – if you filed your taxes last month (March) you may be getting a refund soon. If you do, bank that tax return. While it’s not technically a windfall, it is *extra* money that wasn’t part of your budget. So go ahead and put it towards your savings. You won’t regret it.
May – Let’s take a moment and think about your financial goals. Short term goals, long term goals… how do you know what to save for first? Short-term goals refer to anything you hope to achieve within 6 months to 5 years (new computer, family vacation). A mid-term, like paying off a credit card or a loan, or a being able to make a down payment on a car is 5-10 years. And a long term is more than 10 years (new house, college education, retirement). Set a target date for each one. Next, prioritize your goals – is this something critical, is it something I need or is it simply something I want? This helps you determine where to put your money each month. A good rule of thumb is the 50/30/20 rule. This suggests that you spend up to 50% of your after-tax income on needs and obligations. The remaining half should be split up between 20% on savings/debt repayment and 30% on entertainment.
June – Do a mid-year review. Use this month to reconcile where you intended to be with where you actually are. Get your credit in check – do you know your credit score? What are the factors that affect it?
July - Build an emergency fund – life is unpredictable and it’s important to be prepared. What qualifies as an emergency? Medical expenses, job loss, accidents, broken appliances, car repair… Set a goal of having enough to pay off 3-6 months of expenses.
August – Pay off, or down, your debt. Take a comprehensive look at what you owe on loans and credit cards and decide how best to attack them. Will you pay off your smaller loans first and then tackle the bigger ones? Or will you try to make payments on the debts with the highest interest rates first? Can you consolidate any of your debt? And while you’re paying off your debts, do your best to not create new one. Curb those impulse purchases!
September – Make a savings goal. It needs to be attainable but also ambitious enough to make a difference in your life. If you’re saving for retirement, September is a great time to review your health benefits election, 401(k) and other employee benefits. If you are able, contribute the highest allowed amount, and see whether your employer will match your contributions or not. Regardless of WHAT you’re saving for, having your money automatically diverted from your paycheck to your savings and investments is an easy and unintrusive way to grow your nest egg without realizing what you are missing.
October – Even though your mind may be on pumpkin spice lattes, take some time between sips to think about long term care. What will your needs be in the future? Long-term care is defined as any care that is longer than three months, and it covers the costs related to a nursing home stay, assisted living facility, or caretakers coming to your house when you get older and start dealing with health issues. Medicare will not cover long-term care costs, and you don’t want to have to dip into your savings.
November – Whether you’re in the market for a new car or you’re looking to refinance the one you already own, November is a great time to look for a deal. With new inventory coming, dealers are looking to move old inventory off their lots. If you already own a car that you’re still financing, now is a terrific time to look around for deals that will allow you to switch to a lower interest rate.
December – Do a year-end review. What did you do well this year? What can you improve upon for next year? And if you got a bonus, go ahead and bank it if you can! Congratulate yourself on getting to the end of the year in a better financial position than you were in back in January.
The best tip of all, which you can implement during any month of the year is use a financial planner. That’s where we come in. If you need help defining your financial goals, reach out to us. We can help you put your goals on paper and keep you accountable.
Our office hosts frequent webinars on a variety of topics. If you’d like to be invited, please contact us to be placed on our mailing list.
Securities and investment advisory services offered through Royal Alliance Associates, Inc. member FINRA/SIPC. Royal Alliance Associates, Inc. is separately owned and other entities and/or marketing names, products of services referenced here are independent of Royal Alliance Associates, Inc.