Financial "To Dos" To Help Kick Off The Year



 Financial "To Dos" To Help Kick Off The Year

Now that we've left 2021 behind and are a month into 2022, we should sit down and try to kick the year off right! If you're anything like me, you probably have a long list of things you want to accomplish personally and financially, of course. To get the year started, here are a few things that can help you get 2022 kicked off in the right direction!


Create a Spending Plan for the year


The word “budget” can be quite restrictive at times. I tell my clients, “I want you to spend your money. I just want you to do it with intention AND on things that matter most to you.” A spending plan creates intention. Many of us have been met with the crossroad question of, “I’m already maxing out my 401k, what do I do next?” Or,” what should I do with my extra cash?” The answer is never easy because it’s philosophical. Would you prefer to pay down more debt because the interest is too high? Do you want to put more into an investment account for long-term or intermediate savings? Or do you want to save for a trip this year you’ve been meaning to take? There isn’t a right answer to creating a spending plan as long as your living expenses are being met and there’s intention behind it. A spending plan is a great way to get everyone in the household “paddling” in the same direction.


Save For a “Rainy Day”


If you have not experienced a “rainy day,” believe me when I say, it will come. It can come in the form of your car breaking down, an unexpected accident, or even a planned exit from your employer. In any case, when planning this year, be sure to have a plan to set some money aside for a rainy day. Conventional wisdom says to save anywhere between 3-6 months of expenses. Why? Some career websites that have done their research have found that it can take anywhere between 3-6 months to find another job. One thing I advise my clients to do is to make this part of their spending plan and carve out a monthly amount they’re comfortable with setting aside and living without. You’ll be surprised how fast you can save money when you automatically set it and forget it.

Prioritize Your Goals for the Year


If you don’t set a target, how do you know what to aim for? With the new year, comes many goals and resolutions that we want to accomplish. Part of the issue when listing financial goals is prioritizing which ones should come first. I tend to take the side of prioritizing the goals that will motivate me most so that I don’t abandon ship mid-year. Aim to accomplish 3-5 things during the year. Maybe you want to have a trip to Europe (pending Covid-19 restrictions of course), have more money invested outside of retirement, or make a dent in saving the down payment on a new home. Regardless of the goal, prioritize. This goes double if you are in a relationship. Remember, if you’re going to paddle, you might as well paddle together in the same direction!


Revisit Your Investment Risk Tolerance


Many times I get the question, “Am I invested in the right things?” The answer depends on your investment philosophy. My take, like many other financial planners, is to initially measure our clients’ risk tolerance. This is a measure of how you’ll act in times when the stock market goes haywire. There are plenty of investment companies out there that have risk tolerance questionnaires to measure your risk. I personally like Vanguard’s Investor Questionnaire. Depending on how you answer the questions, you’ll get a score that tells you how your investment portfolio should be allocated in terms of stock to bond ratio. If you’ve been asking yourself recently whether you should buy, sell, or hold an investment, I suggest taking a risk tolerance quiz to make sure your investment portfolio aligns with your risk tolerance.


Don’t Let a Good Year Bring You Down


You may have gotten a raise, exceeded sales expectations, or your business did well. What happens when we end the previous year on a good note? Well as the saying goes, "The taxman cometh.” Don’t let a good year bring you down with a higher tax bill. It’s not uncommon that when people transition to earning more income, they receive a surprise tax bill the following year in April. January and February are an opportune time to meet with your tax professional or seek out a tax professional to run some preliminary tax calculations for you. This will allow you some time to put money aside into a savings account for tax purposes in case your taxes are higher than expected.


Want to know more about how a financial plan could help you? Click on the clock below to set up your next meeting!


MyLife Financial is a fee-only, virtual financial advisor providing objective and independent advice. Our clients are busy professionals that face daunting questions of how today's financial decisions will affect their long-term financial success. Everything written is strictly for informational use only. Please seek the advice of your CPA, Attorney, or financial professional before implementing any strategies.


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