Eight Steps to Enhancing Your Financial Health in the New Year

By LaRue Gibson on January 2, 2024

As the calendar ushers in a new year, we want to encourage you to not only look back to reminisce, but to look ahead to imagine. When it comes to achieving the life you’ve imagined, a new year’s financial assessment will help you take stock of where you are and where you want to go. So, go ahead and savor your past year’s accomplishments, but look to your future as well. Don’t just make a resolution; make a plan, a financial plan with the help of LRG Wealth Advisors.

As we begin a new year, allow us to briefly discuss eight steps that can put you on the right track financially and help you stay on course all year long.

Step 1: Where Are You?

You can’t make meaningful financial changes in the new year unless you know where you are right now. A good place to start is with a snapshot of your overall wealth, otherwise known as your net worth. Income is a neighborhood definition of wealth. Net worth, however, supplies the fuel for your future financial well-being and as such should be your focus in any wealth assessment. You calculate your net worth by adding up your assets (what you own) and then subtracting liabilities (what you owe). Our team can help you with calculating your net worth. Just ask. Your net worth serves as the benchmark to assess your progress towards your goals over the years. Also, it’s a good idea to review your credit report to make sure your accounts and liabilities are listed accurately.

Finally, look at your cash flow over the past year. What did you earn each month? What did you spend? If you regularly spend more than you earn, you’ll need to make some changes.

Step 2: Set and Prioritize Your Financial Goals

What are your long-term goals? What interim steps must you take in the new year to realize those goals? Failing to plan is planning to fail. Write those goals down. Better still, engage LRG Wealth Advisors to develop a long-term financial plan that delineates the interim steps necessary for success.

Step 3: Spend in a Manner Aligned with Your Budget and Your Financial Plan

We all need a budget that will support current living expenses as well as future goals. Itemize monthly expenses, both essential and nonessential. Make sure any top priorities such as savings or debt reduction are included in your list of essentials. When you make a spending decision, make it in the context of your goals. And if you spend beyond your budget, do it with a conscious understanding of how it may derail your plan and how you’re going to reduce your future expenditures so you don’t fall into more debt than you can handle.

Step 4: Plan For The Unexpected

Establish an emergency reserve fund equal to six months of essential expenses. If possible, invest these funds safely with an eye towards earning the rate of inflation after taxes. Don’t touch this money except in an emergency. Furthermore, know what type and how much insurance you need. Obviously, health insurance is a must, but do not neglect property and casualty insurance to protect your automobiles, your dwelling, and your personal items. An umbrella policy makes sense if you have accumulated a substantial net worth. You may need life, disability, and or long-term care insurance too. Perhaps you need a review of what you have and/or need. We can help.

Step 5: Invest in a Risk Appropriate Manner

Know your risk tolerance. How much of a drop in your investment portfolio value can you emotionally weather? Understanding your true risk tolerance informs your choice of asset mix between cash, bonds, stocks, and real assets. Update your risk profile assessment, especially if the prior year’s markets unnerved you. Review your portfolio regularly and reallocate assets as required. Don’t just know how your investments performed, go deeper to understand why they performed the way they did. Again, our team can provide guidance.

Step 6: Optimize Your Resources

Use the new year as a motivation to review employee or government benefits that may be available to you. Are you eligible for a pension from a former employer? Could you get better insurance coverage through a spouse’s plan? If you’re approaching retirement age, think carefully about the best time to file for Social Security benefits.

Step 7: Ensure Your Legacy

Legacy involves caring for those you leave behind as well as supporting those in need. You may not need a complex plan, but at least create a simple will, especially if you need to appoint a guardian for minor children. Beyond that, think carefully about how you’d like your assets to be distributed and work with an attorney to prepare the appropriate documents, including an advance health care directive. And be sure to review and update beneficiaries on retirement accounts and insurance policies.

Step 8: Communicate

Include your spouse or partner and children in financial matters. We acknowledge that this may prove difficult, but ensuring your financial desires occur and simplifying the tasks involved in settling your affairs require disclosure. Share your priorities, budget, and legal documents as appropriate so that everyone in your family or support circle is onboard and willing to do their part.

These eight steps will put you on the path towards the life and legacy you have imagined. However, you don’t need to do them alone. Recruit your support system and, if necessary, professionals like us, LRG Wealth Advisors.

Happy new year. Let’s plan for an amazing year! Take good care.