At this time of year, it’s normal to look back over the past 12 months for a view of what has happened and, at the same time, try to peer into the future to get ready for what might lie ahead. In fact, our month January is named for the Roman god Janus, who is usually depicted with two faces: one looking forward and the other looking back.
As you look back on your financial affairs for the past 12 months, are there areas you’d like to improve, going forward? Or did you accomplish some important goals that you’d like to repeat during the coming year? For most of us, the answer to both questions is probably “yes”; there are always areas where we could improve, and at the same time, most of us have had some successes that we’d like to repeat.
One of the best ways to both get a good start on the year and also to build solid momentum that can carry you all the way through is to build a plan that can become your financial road map. Even if you don’t hit every single goal you set for the year, you’ll get much closer if you set some useful goals and form some helpful habits. Let’s take a look at some helpful hints that can put you on course for a successful financial year.
Set up your budget
Probably the most important rule for financial success and wealth-building is, “Spend less than you earn.” And the number-one way to accomplish that is to have a budget that accounts for your monthly needs and wants. As long as your income is consistently more than your “outgo,” you’ll be able to make steady progress toward the financial goals you’ve set for yourself. As we’ve pointed out in a previous article, spending less than you earn is the first and most valuable step toward financial freedom.
While a simple spreadsheet or even a handwritten listing of your monthly financials can work just fine, there are now a number of digital and online budgeting systems you can use to easily and quickly keep tabs on how you’re doing. Some options, like Quicken Simplifi, come with a monthly or annual fee and include extras like spending plans and links to savings and investing accounts. Several apps, like YNAB (You Need a Budget) and PocketGuard have a free trial version but require a fee for premium services like bill cancellation and syncing with bank cards and accounts. The advantage of using one of these or a similar budgeting system is that they can provide you with a financial dashboard that permits an automated, monthly view of your finances. Many of the tools also allow you to set spending, saving, and investing goals. For those who find it difficult or tedious to keep track of income and expenses from month to month, an online budgeting system can be a game-changer.
Prioritize your savings
Closely related to budgeting, developing the “savings habit” is one of the best things you can do to secure your financial future, both in the new year and for years to come. In fact, one of the great things about a budget is that it can help you remember to “pay yourself first.” Over time, optimizing your savings will also permit you to take maximum advantage of growth potential and compounding, as your money begins to work for you (instead of the other way around).
Set goals that matter to you
As Yogi Berra famously said, “If you don’t know where you’re going, you’ll end up somewhere else.” We all know the importance of goals, but what we also need to remember is that everyone’s goals are different. This is nowhere more true that with personal finances. So, it’s vital for your financial road map to have a clear destination that matches what is most important to you. More time to devote to friends and family? Funding education, either for yourself or a younger family member? Travel? Launching a second career? All of these are worthy objectives; which one is most important to you? And by the way, this is just important for those aiming for or already in retirement as it is for those still in their earning years. Your retirement lifestyle should reflect your unique values and priorities.
Organize for financial success, both now and later
As you continue to put your financial house in order, you should ensure that your planning extends to how you wish your estate to be handled when you’re either unable or unavailable to direct your own affairs. What we’re talking about, of course, is estate planning. No financial plan is complete until it includes a properly designed will or trust that documents your intentions for your estate. Your estate plan should also include valid powers of attorney and a medical directive—sometimes called a “living will”—so that those close to you will know how you want your financial and healthcare matters handled if you should become incapacitated. And don’t forget about your digital estate: things like your social media accounts, credit card rewards and points, cryptocurrency, and even bank and investment account logins. All these matters should be organized, documented, and communicated to those you intend to entrust with the responsibility for ensuring that your intentions are carried out.
Get the right help
One of the best things you can do to establish and execute a successful financial plan is obtain the services of a qualified, fiduciary financial advisors. By acting as your “money coach,” your advisor can help you fine-tune your plan, keep you on course, look for ways you can speed your progress, and provide the professional, evidence-based research and guidance you need to navigate the shifting financial and economic landscape. At Mathis Wealth Management, we work with clients to build financial strategies design around their unique circumstances and goals.
