As the holidays wind down and the New Year moves into full swing, its usually a good time to re-evaluate your finances. At Wisely Advised, we realize that life’s circumstances are always changing. Many of you have set a New Year’s resolution for this upcoming year and may be making some lifestyle changes in order to achieve those goals. We believe this is also a great time of the year to re-assess your financial plans and set some new goals.
Lifestyle Creep:
A lot has happened in the past year. Some of you may have gotten married, become parents, welcomed grandchildren, received a promotion, started a new job, or have even reached retirement. Whatever the case may be, it is important to go over how your financial circumstances will reflect these changes.
Goals:
As you plan for retirement your financial goals may have changed from previous years. You may want to travel more, spend more time with the family, or pick up a new hobby. Now is the perfect time to re-assess these goals and make sure you are on the right path. You may find that you need to save more for these exciting new endeavors. If you don’t have a budget now is a great time to implement one.
Budgeting:
We realize that budgeting is not always the easiest thing to talk about. Many believe that it will happen naturally. However, there is no way to guarantee that you will be maximizing your savings if you haven’t evaluated your spending habits. There are three steps that you can use to create a budget:
- Write down your income
- Deduct your expenses
- Set your financial goals
Emergency Fund:
An emergency fund is a necessity. No one can predict what will happen tomorrow, and that is why it is always important to make sure that you have an emergency fund set up. A good rule to follow is maintain six months’ worth of monthly expenses available to live off. Because everyone’s situation is unique there is no specific dollar amount, so the six months of living expenses is what we recommend. You want to make sure that you have enough for the daily necessities like food, housing, transportation, utilities and the proverbial rainy day.
Debt:
One area that many people struggle with in January is debt, yes, it’s time to open those credit card statements from Christmas and pay the piper. Start this year off right by controlling what debt you have. Start by paying off smaller debts first. Getting in the habit of making these small payments will eventually allow you to make greater payments to any larger debt that you have. As the saying goes, a borrower is a slave to the lender.
Investments:
Early in the year is a great time to review your investments and retirement plans. After a year like last year, it’s a good time to take a look at how things performed. Remember, markets are out of your control. You don’t control the federal reserve; you can’t control whether there is a war or not, and you definitely can’t control inflation. What you can control with the help of your financial advisor is your investment strategy and corresponding asset allocation. This is true no matter what stage of life you are in. We understand life happens and you may need to rethink or adjust your investment allocation. Having that conversation early in the year helps set the stage for success throughout the new year.
Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients.