Rich or poor, it’s never too late to germinate a financial plan – Press Enterprise

This year, we may have made the same resolutions as in the past: lose weight, exercise, save more, or pay off debt.

In fact, 65% of Americans ages 18 and older considered a financial goal for the New Year, according to a 2021 study by Fidelity Investments. The main financial goals were to save more money and pay down debt, with the overall goal of creating greater peace of mind. After all, who doesn’t want financial security?

Many of us started January with excitement making resolutions, but soon we will lose focus and forget about those commitments. New Year’s resolutions often fail because our goals are too big to bring about real change in our lives. Goals should be clear and specific, such as paying an extra $500 a month to cover credit card debt or scheduling a meeting with a lawyer to discuss and prepare estate planning documents.

Managing your finances should be more than a New Year’s resolution to forget about by February. It should be a way of life. Designate January as the review month, then implement the changes needed to reach your financial goals. Write down this period each year and consider it your personal financial audit. You must complete this task every year during the same period as for filing a tax return.

How do you know if your financial situation is better or worse than the previous year if you don’t compare the facts?

What is your net worth?

Whether your net worth is high or low, you need to understand what it is. Without understanding where you are financially, how do you plan for your future? Calculating your net worth sounds complicated, but for most people, it’s not. Make a list of your assets (what you own). Next, subtract the liabilities from the assets (what you owe) to determine your net worth. If you’ve never calculated your net worth, use this year’s net worth statement as a reference for the future.

Is your net worth increasing or decreasing? Understand why it changed. Are you saving more, has your debt gone up, or has the stock market gone up or down?

Create a budget

Most people know how much they pay for their mortgage and car payments, but few pay attention to how much they spend on food, Instacart, or online shopping, especially if they use a credit card to pay. these purchases.

Budgeting will help you understand how and where you are spending your money. Track all expenses for at least 30 days, or even better, the whole year. Write down your monthly expenses first, then add up the additional expenses. When tracking your spending, consider the following:

— How much will you need to save to maintain your standard of living in retirement?

— Are you maximizing your employer’s match and the annual contribution limit in your pension plan?

— Are you saving enough to meet your short-term and long-term goals?

— How can you reduce your expenses and fixed expenses?

— Do you use credit cards every month because you are short of money?

— How can you eliminate your debt?

Plan expensive items

Are you planning to move house, buy a car, replace your roof or pay school fees in the future? Do you know how much this expense will cost and have you thought about how you will pay for it? If the money isn’t readily available in your bank account, sketch out your timeline, break the expense down into a monthly cost, and work the expense into your budget.

To avoid accumulating unwanted debt, what changes in your spending can you make now to save for this goal?

Prepare for the unexpected

As we recently recalled, life can change unexpectedly and quickly. Are you prepared to the best of your abilities in the event of job loss, illness, disability, natural disaster or lawsuit? Insurance and savings can help protect you against unforeseen events.

— Do you have an emergency fund with at least six months (or more) of expenses in a savings or money market account?

— Are you sufficiently insured to cover your risk?

— Do you have a contingency plan in place and supplies readily available in the event of an unexpected natural disaster?

If you’re tech-savvy, consider storing important inventories and documents on a portable hard drive. It’s also a good idea to keep copies of birth certificates, passports, trusts, wills, trust documents, home improvement records, and insurance policies in a small, secure disposal box. (the fireproof and waterproof type that you can lock down is best) that you can grab quickly in case you need to evacuate immediately.

Review portfolio allocations

Does your current portfolio strategy in your retirement account and investment accounts meet your goals and objectives? Does the investment risk match your personal risk tolerance? Is your portfolio increasing or decreasing in value? In 2021, the S&P 500 index rose by more than 26%. If your wallet lost money last year, it would be wise to find out why.

Protect your heritage

Without proper beneficiary designations, a trust, a will, and other basic documents, the fate of your assets or your minor children can be decided by lawyers and tax agencies. Probate fees, taxes and attorney fees can erode your estate and delay the distribution of assets when your heirs need them most. If your estate planning documents aren’t in place or need to be updated, schedule a meeting with an estate planning attorney.

January is a great month to spend time reviewing your finances. New tax laws, higher pension contribution limits or lower required minimum distributions from your retirement account may affect you. Take charge of your future by taking the time to perform your annual audit, identify and eliminate red flags, while implementing strategies to achieve the best financial results.

Teri Parker is Vice President of CAPTRUST Financial Advisors. She has practiced in the area of ​​financial planning and investment management since 2000. Contact her by email at [email protected]