It’s a new year, and we just know it’s the start of something great for you. As with any fresh start, the new year is the perfect time to start making a few adjustments — starting, most likely, with your finances. This year, instead of vague new year’s resolutions or stringent goals that set you up for failure, why not start with steps that are realistic and beneficial while keeping future you in mind? Let’s make 2022 the year of financial freedom! Ready to get started? We’ve got some great suggestions.
Set short- and long-term financial goals. We all have financial aspirations, and creating financial goals forces us to prioritize what’s important to us. You’re more inclined to save if you have a goal, and you’re more likely to meet your goals if they’re specific and attainable. Create a time-phased strategy and determine what you need to do now to accomplish it. That means several short-terms goals can be much more effective than one long-term goal.
Reassess your budget — or start one. A budget gives you more control over your spending and saving. By identifying your money goals, a spending plan helps keep your eye on the prize, and tracking ensures you don’t spend money you don’t have. By reviewing your current budget, you may find that last year’s spending priorities don’t fit with this year’s plan. And if you don’t yet have a budget, there’s no time like the present to create one and begin tracking. You might find extra funds to put toward savings or retirement.
Take control of debt. Make this the year you make an extra effort to pay down (or off) as much of your debt as you can. Start by paying off the debt with the highest interest rate because it’s costing you the most money. Or, if you need the motivation of a quicker sense of accomplishment, pay off the debt with the lowest balance first. Having less debt can help lower financial stress, give you more financial freedom, and allow you to focus on other financial goals, but you’ll want to be sure you have a plan for the extra money before it becomes available. Adjust your budget accordingly, and don’t forget to treat yourself with small “milestone” rewards!
Boost your emergency fund. Having an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding financial worries to your list. The goal is to save enough to cover at least 3-6 months’ worth of living expenses. This doesn’t include any money you’d use for entertainment, dining out, vacation, etc. Don’t be discouraged, as it may seem overwhelming or unrealistic. Build it up by saving small amounts on a regular basis, and over time, you’ll eventually meet your goal. The important thing is that you’ve started saving something.
Meet with the experts about your financial future. If the last couple of years have shown us anything, it’s that life is unpredictable, and no matter how much we plan, there’s always something else to consider. So, carve out some time to meet with your financial advisor, retirement plan sponsor, and your estate planner to make sure every “i” is dotted and every “t” is crossed. This is a good time to check in regarding new goals/updated goals and future objectives, and they’re just the folks to help you get there.
Review investment mixture and risk. Whether your retirement date is clearly in view or you’re still decades away, it’s important to check in with your portfolio — and the folks who manage it. You’ll want to make sure your investment mixture and risks still match your investment goals and plans. While being aggressive late in your career may serve you well in rising stock markets, it could be disastrous in a declining market and potentially put you at risk so close to retirement. For younger investors, being too conservative could limit your growth potential, causing you to miss out on great earning years knowing you have time to ride out market fluctuations.
Remember to rebalance. Rebalancing a portfolio is simply making sure your allocations are still as you’d like them to be. As the market fluctuates, so do your overall allocation margins. Maybe you’re all in on one mutual fund, or maybe you’ve spread your investments into a variety of mutual funds. Make sure your funds and allocations are how you want them. Again, your financial advisor and retirement plan educator can offer insight on managed accounts, but you’ll want to look at any self-directed investment accounts, too.
Increase retirement plan contributions. The more money you put into your plan now, the bigger your potential retirement balance will be. Increasing your contribution even 1% — which may only be an extra $15, $20, or $25 per paycheck — can make a big difference over the long term. (Tip: Make this an annual practice, if you can.) If your company offers a matching contribution, make sure you’re contributing enough to receive the full match. It’s free money that helps your account grow.
Review your beneficiaries. When was the last time you updated or reviewed the beneficiaries on your retirement account? Or, to pose the question another way: Do you remember who your beneficiary is? (It’s OK if the answer is no; it just means it’s time to review!) If you’ve had a life-changing event such as a marriage or a new baby this past year, now’s the best time to update your beneficiary. If nothing has changed, it’s still good practice to review who you have listed periodically. Doing so ensures that your funds and will end up where you intended.
We hope we’ve given you some guidance regarding your finances for the upcoming year and beyond. Remember that starting is half the battle. Identifying and achieving financial goals can be tricky, but we’re here to help every step of the way. For more insight on achieving your retirement goals, click here or contact us at 888.769.2366. Cheers to a financially healthy 2022!
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