Change. It can be something we look forward to and something we fear. It can be scary but also exciting. One thing’s for sure – in the past couple of years, we’ve all experienced changes, both big and small. And even though most of us reflect on years past around this time of year, this feels different. We’ve helped some of our clients navigate complete life overhauls, curveballs that threw things off axis, and anxiety over foundational clean-up.
So, here we are again. It’s New Years. A time of year where everything is possible and positive change is top of mind. As we reflect on the year behind us and how to prepare for the one ahead, we felt it was the perfect time to share some financial “to-dos” to add to your New Year’s Resolutions that will set you up for financial success during the coming year. Here are a couple ideas to get you started:
For many of us, November and December can feel like the most expensive time of the year. The holidays often bring not only happiness and cheer but also extra spending on gifts, night’s out, Ubers home from holiday parties, travel to see loved ones, etc. These little (or not so little) extravagances can quickly add up and wreak havoc on our budgets. This January 1st, resolve to review your monthly budget and make sure this year’s spending is realistic compared to last year’s. We’re not suggesting that you give up every indulgence, but rather prioritize (or re-focus on) saving, not just splurging. Pick a number than feels comfortable in your budget and set it aside in a rainy-day fund. Rainy day fund fulfilled? Consider ramping up your investments and making wealth building a priority.
Review your open accounts
The New Year is a great time to review open accounts – not just your financial accounts but also any subscriptions or recurring costs. Consider pulling a free credit report to check your open credit cards and make sure there are no surprises on your credit score. If you are thinking about closing a credit card account, make sure it’s not your oldest card and consider how that may impact your credit utilization ratio 1 . If it’s a free card, it may not be worth the ding to your credit score to close it. If it’s a card with an annual fee, you may want to try contacting the credit card company and seeing if you can downgrade the card to one without a fee, rather than fully closing the account.
While reviewing your bank, brokerage, and/or debt (mortgage, car loan, student loans, etc.) accounts, you can also get a jump start on tax season by pulling end of year statements. While official tax forms likely won’t be ready for all your accounts (especially brokerage or retirement accounts), end of year statements can help make sure you don’t overlook anything come April.
Lastly, review your recurring expenses and your subscriptions. Did that “free service” switch to a monthly payment at some point last year? Do you still watch Netflix and Hulu and Disney+ and AppleTV or does it make sense to eliminate one of them (especially if one of your resolutions is “less screen time”)?
Automate your savings
Now that you’ve got a handle on your open accounts, the next New Year’s Resolution should be to automate your savings. Assuming you’re paying off your monthly debt and have some funds left, allocate and automate transferring funds to your various savings accounts. Did you get a pay raise or a bonus? Consider increasing your contributions to your retirement account by the same percentage as your raise. Maybe use your bonus to sock away an extra bit to your children’s 529s or get a jump on your “fun” budget for the year.
Review your long-term plan and set out to fill in any gaps
Knowing that life can change at any moment may make it feel like there’s no reason to plan for the distant future or the “minimally likely” events. However, if anything, the last few years should have the opposite effect. Planning for the unlikely by ensuring adequate insurance coverage (including but not limited to home, health, auto, and/or life insurance) should give you and your family comfort knowing you’d be covered if the unfortunate were to happen. In a 2021 survey of 2,000 respondents, more than half the population reported feeling “completely lost” when it comes to understanding health insurance specifically.2 If this is you, you’re not alone! However, there’s no time like the present to get educated and comfortable with the various terms and conditions of your insurance policies.
Once you get your insurance needs under control, be sure to review your estate plan to make sure your loved ones are accounted for and there’s a plan in place for your assets. If there have been life changes (new child, new home), it may be time to update your estate planning documents. Be sure to review the beneficiaries of your life insurance and retirement plans and make sure they’re still accurate. If you don’t have a trust yet, 2022 might be the year to get one!
Change is inevitable but the basics of your financial life shouldn’t be left to chance. By planning for the long term and reviewing regularly, you can put yourself and your family on solid financial footing. Give yourself the confidence to embrace all the changes that come your way by getting your personal finances in order. If you’re feeling lost or overwhelmed, let us help! Contact us to see how we can help you on your financial journey.
Garrison Point Advisors, LLC doing business as “Treehouse Wealth Advisors” (“TWA”) is an investment advisor in Walnut Creek, CA registered with the Securities and Exchange Commission (“SEC”). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. TWA only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of TWA’s current written disclosure brochures, Form ADV Part 1 and Part 2A, filed with the SEC which discusses among other things, TWA’s business practices, services, and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
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