As we embark on a new year, especially after coming off one that was challenging in so many ways (especially from a financial perspective), it is a great time to take a step back and assess your overall financial position. While it is natural to focus on account balances, we encourage you to think about why you are seeking to build wealth in the first place. Afterall, wealth is a tool that provides you with the freedom to do what makes you most happy and fulfilled – both in how you spend your time and in how you spend your money. Wealth itself is not the ultimate goal.
Proactive financial planning is designed to help you make positive decisions today that will increase the likelihood of you attaining the financial freedom that wealth accumulation affords us. But it is all about balance – our futures are not guaranteed -so while planning for tomorrow is imperative, living for today is as well – it is a delicate equilibrium.
So, what can you be doing today?
- Review your short and long-term goals. Have they changed from last year? Are you closer today to reaching those goals than you were in January 2022?
- Set both personal and financial goals for the new year. The goals should be specific, measurable and attainable. Personal goals may include carving out time for yourself, completing specific tasks on your to-do list, meeting physical fitness goals, spending more quality time with family or just being present in your life. Financial goals may include meeting professional milestones, being more deliberate in your spending decisions, allocating dollars toward various savings objectives, becoming more educated and involved when it comes to making financial decisions, and instilling good financial habits in your children, to name a few.
- Review your overall financial plan in light of these goals. Financial plans are meant to evolve over time – that is why it is so important for strategies that you employ to be flexible. Life changes and goals change – that is a good thing. You must make sure that you modify your financial plan to reflect those changes so that it stays current and relevant.
- Ask yourself how you were able to handle the volatility within your portfolio from an emotional perspective? Many of us assume we can handle more risk than we are ultimately comfortable with and 2022 was a great test of that. If you couldn’t sleep at night because your portfolio was dropping in value, you may want to consider revisiting your investment strategy in 2023.
- Review your estate plan. You should check that you have primary and contingent beneficiaries on your investment accounts, retirement accounts, and life insurance policies. To protect yourself from a lapse in decision making ability, make sure that you have powers of attorney in place and that guardians have been named for minor children. If you have a Trust in place, you want to be sure the terms of the Trust are still appropriate and that your assets are titled in the name of the Trust. It is also important to educate the key decision makers, such as the Trustee(s), of your intentions.
- Educate yourself on ever-evolving tax laws and regulations. Secure Act 2.0 was passed at the end of 2022. It has multiple provisions that impact everything from retirement planning (both from a savings and withdrawal perspective) to student loans to 529 plans. For everyone, especially those approaching retirement, it will be important to understand the implications of Secure Act 2.0 on your financial plan and to incorporate strategies accordingly.
- Surround yourself with fiduciary advisors and professionals who you can trust and who are looking out for your best interests. Financial planning and taxes are complicated – you don’t have to know or understand it all. Just as you would go to a doctor for regular check-ups and seek out the best physicians when something is amiss with your physical well-being, you should do the same when it comes to your financial well-being. There is no substitute for being proactive when it comes to both your physical and financial health.
- Don’t be too hard on yourself. It is important to hold yourself accountable but learn from your mistakes and miscalculations and seek to make improvements in the coming year. Focus on what you can control and don’t let what you can’t control weigh you down or result in inaction. Remember that doing nothing is doing something.
As fiduciary financial planners, we are here to help, to ask questions, to listen and to offer advice and guidance that will help bring you closer to making your dreams a reality.