10 Keys to Greater Financial Well-Being in the New Year
A Guide to Setting Financial Resolutions and Overcoming Money Stress| By: Randall E. White, CFP®, RICP®, CRPC®, CMFC®
If you’re among the 73% of Americans for whom money is a source of stress in their lives, you may be considering a financial resolution or two for the New Year. You might also be unsure where to start or feel overwhelmed by the idea of tackling something that feels immense. Luckily, you can take small steps to create big change in your financial well-being as we move into the new year. Below, I’ll share 10 keys to greater financial health that you can use as a guide as you set your financial resolutions for the year ahead.
Key #1: Earn More Than You Spend
Living within your means is a foundational piece of your financial health puzzle. It’s a simple concept, but not always easy to put into practice. After all, it takes effort to create a budget and stick to it. You may even feel anxiety about looking closely at your money and realizing you’ve been overspending. The new year is a perfect time to tackle this step that’s been holding you back. Simplify the process by utilizing a budgeting app like Personal Capital or Mint and start by sticking to a budget for just one month.
Key #2: Save as Much as You Can
Maybe you’re way past advice like “save 10% of every paycheck from the moment you get your first job.” Maybe you don’t have that emergency fund of three to six months’ worth of expenses that financial professionals recommend. It can be easy to feel defeated about saving if you’re behind the eight ball, but here’s the thing: It’s never too late to begin. So, set an intentional goal of saving what you can this year. Start with a goal that feels doable to you and build upon it as the year unfolds.
Key #3: Make Sure Your Portfolio is Diversified
You never want to put all your eggs in one basket, so make sure your investments are allocated across industries, geographies, and more. Taking the time to diversify your portfolio requires looking at your risk tolerance, cash flow needs, time horizon, and goals and then making diversification decisions accordingly. Doing so is an important part of your long-term financial well-being, and it will help you navigate both good and bad times in the markets.
Key #4: Stop Being an Emotional Investor
Speaking of your investment mindset, it’s time to make peace with the fact that the stock market is cyclical – there will always be ups and downs. If you have a history of getting emotionally invested in the ups and terrified by the downs, resolve to not let your emotions dictate your investment decisions in the future. Have a long-term focus and resolve not to look at daily market fluctuations.
Key #5: Let Compound Interest Work for You
Is your money making you more money? If you’re not fully embracing the power of compound interest, you’re missing opportunities to build your wealth. Consider this: At a return of 7%, your money doubles roughly every ten years. If you’re 40 and you’ve saved $1 million, compound interest will grow that savings to a whopping $16 million by the time you’re 80. So, if you could have more of your money invested and working for you, make it happen this year.
Key #6: Focus on Investor Education
The more you know about the investment world, the better you’ll be at choosing the best investments for you – and understanding which are completely wrong for you, too. Resolve to read finance books, listen to weekly podcasts, or even take an online investor education course to level up your knowledge. Not only will this help you invest wisely, but you’ll be more discerning about hiring the right financial advisors for your needs, too.
Key #7: Focus on Your Kids’ Financial Literacy
While you’re educating yourself, don’t forget to teach your kids important concepts about personal finance and investing, too. Most schools today neglect this subject matter, so it’s up to you to start the conversations at home. You can share money values by letting the kids help determine your family’s charitable giving for the year and share practical knowledge and skills by showing them how you grocery shop on a budget or what it looks like to save incrementally for big purchases. Fostering financial wisdom in your kids while they’re young is powerful and will help them to become financially savvy adults.
Key #8: Make Sure Your Estate is in Order
If you don’t have a will, the courts will decide how to distribute your assets when you die. Even if you are relatively young and healthy, having a legal will is critical in ensuring your wishes are carried out and your family members receive the assets you would want them to have. Although it can be uncomfortable to have these conversations, having an estate plan prepared can save your family a lot of heartache and anxiety in the future.
Key #9: Share What You Have
If you’re fortunate to feel financially healthy and you have enough to live comfortably now and into retirement, think about how you might spread the wealth and achieve more meaning behind your money. This could mean being more intentional about your annual charitable giving, making your giving more of a family affair by involving your children and grandchildren or even setting up a donor-advised fund to manage your charitable donations.
Key #10: Make Sure the Right Professionals Are by Your Side
Regardless of which of the above keys you’re resolving to tackle in the new year, it’s important to have the right financial professionals in your corner to offer guidance and motivation. Look for a financial advisor who is a fiduciary and will always keep your best interests in mind, while also understanding your unique goals for the future.
Financial Resolutions Impact More Than Your Finances
As you set financial goals for yourself in the year ahead, know that you’re likely to see the fruits of your hard work in multiple aspects of your life. Increased financial health can also make you happier, more productive, and more fulfilled. Less financial stress means better emotional and physical health, too.
If you’re ready to level up your financial well-being in the new year, give us a call today. At TriCapital, we are committed to helping you feel more confident about your financial future. We are passionate about our work and we would love to help you and your family build a firm financial foundation for life.
Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.