It’s a new year – and time for New Year’s resolutions. One of the most important financial resolutions you can make is to set financial goals. After all, if you don’t make it a point to set goals, you’ll never reach them. Plus, if you’ve set goals in the past, a change in the calendar from one year to the next is an excellent time to revisit those goals and make sure they’re up to date.
To make setting financial goals easier, here’s a checklist to consult, to make sure you cover goals in all areas of your financial life.
1. Determine your goals
Don’t keep your goals vague. Make sure you articulate them in some way, such as writing them down. It’s prudent to divide them into short-term goals (such as saving for a down payment for a home) and long-term goals (saving for retirement). Discuss them with your spouse. Making goals concrete is the best way of achieving them, as you can then set up specific plans to do so.
2. Review your budget
Financial goals rely, more than anything else, on the money available to achieve them. You need to know how much money you have coming in every month (your income) and how much your expenses are – fixed expenses, recurring expenses, and one-time expenses. For many people, expenses have risen along with inflation – which is one of the reasons periodic reviews of your budget can help you manage expenses effectively.
Make sure you are comfortably meeting your needs and adjust your budget if necessary. Determine how much disposable income you have left over in a given month, on average. Are your current level of earnings versus expenses sufficient to meet your goals? If not, make a plan to adjust your earnings, your expenses, or both.
3. Review your emergency fund
Life sometimes throws sudden, unexpected expenses at us. These can range from a sudden expensive automotive repair to a serious illness requiring absence from work. The best way of not being derailed financially by such expenses is to have an emergency fund to handle them.
4. Make a plan to manage debt
Debt can get in the way of achieving your goals since monthly debt service bills take money that could otherwise be available to you for goal achievement. There are many ways to manage debt, including paying off high-interest debt first (a debt avalanche), paying off debts in order of amount, with the smallest first (a debt snowball), or obtaining a personal loan to consolidate your debt. (Personal loans have generally lower interest rates than credit cards.) Discuss the most advantageous way to pay off your debt with a San Antonio, Texas financial advisor.
5. Review your investments
Many goals, such as retirement, require investments. A new year is a good time to review your investments, on several levels. Are your investments on track to meet your goals? If not, how do they need to be adjusted? Is your level of investment tracking with your goals?
Is your asset allocation appropriate for achieving your goals, the time horizon of your goals, and the current environment? As people approach retirement, their asset allocation may need to turn more cautious and more focused on avoiding risk in volatile investments, such as stocks. But if you are younger, you may want a relatively high asset allocation in asset classes with more risk. Stocks, for example, have more risk because they fluctuate, but they also provide more reward, on average, because stock returns can outpace both cash and bonds. A younger person’s time horizon to retirement provides plenty of time to recover from any down years.
6. Review your need for insurance
Avoiding undue risk is part of overall financial goal achievement. Having adequate insurance for your needs and stage of life is part of financial risk management. You should consider having life insurance if you have dependents. Your major assets, such as your home and vehicles, need insurance. If you have unique assets, such as art or jewelry, make sure they are appropriately insured.
7. Strategize your tax planning
Taxes occur every year. But if you’re paying more than you need to in taxes, it can erode the cash available to achieve your goals. A CERTIFIED FINANCIAL PLANNER™ Professional in San Antonio, Texas can make sure that you pay the appropriate amount of taxes by setting up tax strategies to save as much of your income as possible while still meeting your tax obligations.
8. Create or update your estate plan
Estate plans consist of a Last Will & Testament or trust to ensure that your assets are bequeathed as you wish, and powers of attorney entrusted to make healthcare and financial decisions should you become incapacitated. Without an estate plan, you have no way to ensure that your assets are handled as you wish. If you don’t have one, a new year is an excellent time to create one.
If you have an estate plan, it’s prudent to review it every year. Many life events, such as births, marriages, divorces, and deaths, can change your desired disposition of assets. Many events in a year can change your assets themselves – it’s also important to review whether you have new or expanded assets or if some have lost value. Keep your estate plan up to date with an annual review.
9. Align your financial goals with your values
Many people who believe strongly in Judeo-Christian values want their financial goals to align with their values. This can range from investing in companies whose goals align with their ethical choices and avoiding companies whose products or standards don’t, to charitable giving.
At PAX Financial, we follow the wealth management principles of Biblically Responsible Investing (BRI) because we believe in linking our faith with our finances. A new year is an occasion to draw your financial goals and strategies into alignment with your values and beliefs.
Work with the Advisors at PAX Financial Group
At PAX Financial Group, we are fiduciary financial advisors who are legally required to act in your best interests. We are not linked to any financial product company, bank, or insurance company. We can create customized strategies to meet your financial goals for 2024 and beyond. We will help you increase, protect, and distribute your assets in accordance with your goals, your needs, your wishes, and your ethics.
