Happy New Year! I’m going to help you make it even happier by improving your financial health.
New Year’s is a time when many people vow to make improvements in their lives, and the two areas they focus on most often are health and finances. Unfortunately, most people also fail to stick to their New Year’s resolutions – but that doesn’t have to be you this year. In this blog I’ll cover: The importance of having the right mindset and taking the right approach; tips to help improve your household finances; tips to help improve your savings and investment strategies; and tips you’ll find especially helpful if you’re in or nearing retirement age.
Let’s start with mindset and approach. Tip one is to make goals not resolutions. Resolutions tend to be more like hopes and wishes. Goals are more concrete, and they can be quantified and tracked.
Two, make small, specific goals. It’s easy to get overwhelmed and give up if your goals are too big or vague. People who succeed set smaller goals that are ultra-specific and realistic.
Three, make a plan and include a timeline. Say your goal is to save more money. How will you do it? Does a weekly strategy make sense or a monthly one?
Four, track your progress. The only way you’ll see your progress or recognize the challenges preventing it is by writing things down. The good news is that financial goals are easy to track because they’re a matter of simple math.
And five, realize that for your behavior to change, your consciousness needs to change. That just means realizing your goals need to be written in your mind as well as on paper. You need to think about them, focus on them, and prioritize them.
But what, specifically, are some good financial goals to strive for? Start with these five steps to improve your household finances.
One, take a hard, honest look at your monthly spending. Add up all your fixed and variable expenses and compare those to your income. Calculate how much is left over at the end of each month and look for opportunities to increase that amount.
Two, use the information from your spending review to make a budget. Keeping a budget is the most surefire way to track your spending and gauge your progress toward your goals.
Three, check your emergency fund. If you don’t have one, make it a priority to create one. Ideally your emergency fund should contain enough to cover six or more months of living expenses.
Four, make decreasing your debt a priority. Even if you’re already good about managing debt, consider taking steps to help reduce and consolidate it further.
And five, identify your retirement goals. This is especially important if you’re over 55. The sooner you know your goals the sooner you can start creating a financial strategy specifically designed to achieve them.
Now let’s look at five ways to help ensure your money is working as hard for you as it should be this year. One, increase your employer-matched contributions to your 401(k) or other retirement accounts. If you’re over 50 you can also make catch-up contributions to some accounts.
Two, if you have other investments, review them to determine how much of your return might be getting eaten up by hidden fees.
Three, take advantage of tax efficient investing. Just like fees and other investment expenses, income taxes on your earnings can have a major impact on the performance of your portfolio.
Four, tune out the hype you get from most of the financial media. Remember, a lot of analysts are more interested in getting ratings and pleasing advertisers than they are in helping you meet your retirement goals.
And five, get educated about all the different savings and investment options available to you. Not knowing and understanding all your options increases the odds you’ll end up using strategies that may work against your goals. Make 2022 the year you get educated!
Now, let’s look at five steps you should take this year – if you haven’t already – if you’re within 10 to 15 years of retirement, or already retired.
One, calculate your Social Security income and make a plan to help maximize your benefits. Regardless of how much you have saved, having the right Social Security strategy is one of the most important steps in retirement planning.
Two, create an estate plan if you don’t have one. Estate planning isn’t just about helping protect your assets after you’ve died. It’s central to helping you protect your money and maximize your income throughout retirement.
Three, focus on your health. Healthcare costs and inflation are among the biggest challenges you’ll face in retirement, so the healthier you can be, the better.
Four, review your retirement goals. Naturally, if you haven’t identified them by now, do that first! But even if you have, revisit them to make sure they’re still realistic and accurate based on any changes in your life. Determine whether they are performance-based goals aimed at making a major purchase or leaving a large legacy, or whether they’re income-based goals geared toward things like traveling and enjoying your favorite pastimes with as little stress as possible.
For most people the answer is income-based, which brings us to step five: shift your financial strategy from portfolio growth to retirement income with the help of an advisor who specializes in income!
Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. Arbor Financial Services of Florida, Inc. and Sound Income Strategies, LLC are not associated entities. Arbor Financial Services of Florida, Inc. is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities.