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Starting the New Year Off on the Right Foot
Shared by Strong Valley on January 5, 2023
Starting the New Year Off on the Right Foot
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IN BRIEF
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Today, unlike previous generations, there is an extensive array of financial information that steadily flows from the news media and the Internet. Almost instantaneously, you can review your own finances, ascertain your progress, and make necessary adjustments. However, do all these signs of progress really make managing your finances any easier?

Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

Today, unlike previous generations, there is an extensive array of financial information that steadily flows from the news media and the Internet. Almost instantaneously, you can review your own finances, ascertain your progress, and make necessary adjustments. However, do all these signs of progress really make managing your finances any easier? The fact remains that regular reviews of your entire financial affairs will help put you on a long-term track for success.

Now that it’s a new year, why not add “regular financial reviews” to your existing list of New Year’s resolutions? Here’s a brief description of what a typical review might entail:

Cash Flow Analysis

Does your income equal or exceed the amount you put into savings and expenses? If it exceeds, by how much? The amount in your income that exceeds what you saved or spent is called positive cash flow. If your expenses exceed your income, you have negative cash flow. If your cash flow is negative, it may be time to reorganize and minimize any unnecessary expenses in your budget.

Special Goals

For every financial goal you establish, you need to address the projected cost, the amount of time until your goal is to be realized (time horizon), and your funding method (a scheduled savings plan, liquidating assets, or taking a loan).

Plan your goals on three tiers. On the first tier, you have an emergency fund of at least three months’ of income. On the second tier, you may establish a savings plan for your children’s education or future expenses. Finally, on the third tier are more flexible goals such as: automobiles, home renovations, and vacations.

Enrich Your Retirement

Are you going to have enough money when you retire? Pensions and Social Security may provide insufficient income to maintain your existing lifestyle during your retirement years. Consequently, project your future needs and plan a disciplined savings program for your retirement.

Minimize Income Taxes

Many taxpayers reduce their taxes by taking advantage of tax deductions. While many people are familiar with deductions (e.g., mortgage interest, contributions to retirement plans, and donations to charities), there may also be other ways to reduce your income tax bite. For example, under appropriate circumstances, losses or expenses from previous years may be carried over to the next tax year. A qualified tax professional can help you implement a tax strategy that is consistent with your needs.

Beat Inflation

Suppose the inflation rate is currently 3%. In order to maintain your buying power—just to break even—you need a 3% annual wage increase. A decline in your buying power will certainly lower your standard of living and affect your lifestyle. In the end, you’ll have less money if inflation starts to beat you. So, as you can see, you need to put your money to work to beat inflation. A disciplined approach to saving can help you meet your long-term goals.

Manage Unexpected Risks

You are probably well aware that life sometimes throws us unexpected “curve balls”—that is, risks we haven’t foreseen. Suddenly and unexpectedly, your potential risk may become a financial loss (e.g., you become disabled without income or an untimely death causes financial hardship for your family). Disability income insurance and life insurance offer protection that can help cover potential liabilities and risks.

Meet with Your Financial Professional

In today’s complex financial world, everyone needs help in making knowledgeable, objective decisions. A qualified financial professional can help ensure that your current financial affairs are consistent with your changing goals and objectives. These seven steps will help you focus on your entire financial picture. During subsequent reviews, you may need to make alterations due to changing goals and circumstances. However, if you faithfully keep track of your progress, you may be better able to afford your future lifestyle and finance your dreams.

The information contained within is believed to be from reliable sources. However, its accurateness, completeness, and the opinions based thereon by the author are not guaranteed – no responsibility is assumed for omissions or errors. The views expressed herein reflect our judgment now and are subject to change without notice and may or may not be updated. Nothing in this document should be construed as investment, tax, financial, accounting, or legal advice. Each prospective investor must make their own evaluation and investigation of any investments considered or of any investment strategies described herein (including the risks and merits thereof), should seek professional advice for their particular circumstances, and should inform themselves as to the tax or other consequences of any investments or services considered or described herein. Please see other important disclosures related to StrongValley.com

Your turn – What would you like to know about Starting the New Year Off on the Right Foot?

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