By Eric Reich
I can’t believe we are about to see 2023 go! Since the new year is almost upon us, I thought we should revisit some ways to help start it off on the right foot, financially speaking. Start planning now so you’re ready to address some of these items come Jan. 1.
- Create a budget and stick to it.
I mentioned a few weeks ago about planning ahead for the holidays next year. This can apply to all of your finances, not just the holidays. Review your budget if you have one or create a budget. Look for ways to cut wasteful spending. Let’s face it, we all could probably use less stuff in our lives. If you need a budget sheet, let me know and I’ll email you one I like.
- Start your monthly IRA or Roth IRA contributions now.
Waiting until the end of the year to fund your IRA not only makes it more likely that you won’t do it, but you’ll have lost the year’s potential returns had it been invested.
- Build your emergency fund.
If there is anything the last few years have taught us, it’s that we need to be prepared for the unexpected. Having an emergency fund in place could have lessened some of the financial hardships that events like COVID-19 placed on many of us. Aim for enough savings to cover three to six months of expenses.
- Stop checking your portfolio every day.
Much like the political burnout we all feel every election year due to the countless trash ads, financial news fatigue can have a similar effect on our mental state. Watching it too often can cause you to make poor investment decisions or chase “hot stocks”, which rarely works well over the long term.
- Pay off your credit cards.
Avoiding bad debt is just as important as having an emergency fund. Credit cards are probably the worst kind of debt. Credit cards keep people from ever reaching success in life. Start with the highest interest rate cards and work down to the lowest. Work a second job if you have to, but commit to getting rid of them. Otherwise, you may never get out of a bad cycle. Financially successful people don’t have a lot of debt. They do not avoid debt because they are successful, but rather they became successful because they avoided debt in the first place.
- Get a check-up.
I think we all took our health for granted a little before the pandemic. Good health means less money spent on prescriptions and illnesses. Over a lifetime, that can help you save a lot of money. Healthy people have the ability to work longer, and they spend less on insurance, medications, and doctor visits.
- Rebalance your portfolio.
Many investors were caught by surprise when the pandemic first hit. When markets fell in 2022, many investors were caught off guard thinking their portfolios were “safer” than they were. Those who did not rebalance regularly found out the hard way that the good years enhanced by not rebalancing can be offset by a really bad year. Review where you are and what your risk tolerance is with your advisor to make sure you are properly allocated. History tells us that regularly rebalanced portfolios perform better over time and with less risk.
- Review your estate documents and your beneficiary designations.
I sound like a broken record on this topic sometimes, but I have seen countless horror stories about people who never updated beneficiaries from a former spouse or deceased beneficiary. Always look at these documents every year or two. For many people, this is the big weak spot in their financial life.
- Enlist the help of professionals.
When people make estate plans online or file their own taxes or manage their own investments, they can certainly “save money”. However, the reality is that they often lose far more than they save simply by not being an expert in that particular field. It never hurts to get a second opinion.
- Travel!
We are social beings, and we need to interact with each other. Not doing so can be damaging to our mental health. Taking time for yourself or with your family just to get away and reconnect can have great health benefits, which can lead to better financial choices as well.
I’ve never been more excited to start a new year. As I age, I appreciate everything in my life so much more than I used to. What better time to make a change to your financial situation than in a new year with a fresh start? I wish you a year of good health, happiness, and prosperity.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
