If you’re like me, New Year’s Day already feels like ancient history. If you made a New Year’s resolution, you may be part of the 80% of Americans who discarded their resolutions by February. (1) Thankfully, there’s nothing magical about January 1st. No matter where we are in the year, you can set new intentions and make the small steps necessary to make your goals a reality. If you have dreams of turning your finances around, take the time this spring to dust the cobwebs off of your financial plan and start fresh. Here are some actionable steps to jumpstart your financial plan!
Start Where You Are
Don’t let your past mistakes keep you from moving forward. Did you make some bad investments or neglect to save? Start fresh from today and leave the past in the past. Take a look at your current financial situation, including income, savings, debt, and expenses, then come up with practical goals to make your dreams a reality.
Don’t be afraid to dream big financially. What if you could save $100,000 in the next five years? Having a big goal in mind can inspire you to stay on track. To avoid getting frustrated along the way, celebrate small milestones, such as reaching $5,000, $10,000, $25,000, and so on. Reevaluate your goals frequently to ensure you’re on track and make adjustments as needed. Having a goal in front of you will give you perspective in your day-to-day decisions and help you prioritize your saving and spending.
Reevaluate Your Insurance
Securing your financial future isn’t just about saving and investing, but also about managing your risks. Insurance helps you protect against risks that could ruin you financially. Your insurance needs will change based on your age, employment status, marital status, number of dependent children, etc. It is important to review your coverage each year to make sure you are fully covered and also to ensure you are not spending money on insurance that you don’t need. Double check your named beneficiaries as well to make sure they still reflect your preferences.
Get Your House In Order
If you are excited about conquering your goals, one of the first steps you need to take is to eliminate debt. When you are paying 10-30% interest on any number of credit cards or loans, you are cutting down on the money you have available to put towards your goals. Become relentless about reducing your debt and interest costs and consolidate accounts where you can. If you have a loan with a significantly higher interest rate than the others, you may want to work on paying off that one first. Or, if you're feeling overwhelmed by debt, try paying off the loan with the smallest balance first, no matter the interest rate, in order to gain some momentum.
An emergency fund can help you avoid accumulating more debt. By creating a liquid, easily accessible savings account, you won’t have to rely on debt to cover those inevitable life expenses, such as home repairs or medical bills. Create this cash cushion by putting aside money from each paycheck until you have enough to cover approximately three to six months worth of living expenses. You will never regret having an emergency fund at the ready.
Make Purposeful Investments
Anyone can close their eyes and pick a random mix of mutual funds to invest in, but having a customized retirement plan based on your circumstances, goals, and risk level is what will get you from point A to point B. Asset allocation is the most critical investment decision you can make. Sit down with a financial professional and create an investment philosophy that will give your portfolio a clear sense of purpose.
Consider Unexpected Risks To Your Financial Plan
No matter how hard you work to create a foolproof financial plan, there will always be risks and roadblocks that have the potential to get you off course. Inflation will decrease your purchasing power and rising healthcare costs can eat away at your nest egg. Unexpected early retirement could change the timeframe of your goals, tax changes could throw a wrench into your planning, and the loss of a spouse could impact your standard of living. Speak with your advisor to find ways to protect yourself against these risks.
Partner With A Financial Professional
Whatever your situation, whatever your goals, a financial professional can walk you through each of these steps to get your financial plan in shape. At David Wealth Management, our goal is to positively impact our client’s lives by simplifying their financial goals, decisions, and plans so that they can feel confident in their future.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.