New Year. New You?
Every year it seems that the headlines are covered with the sentiment of, “New Year, New You!” We are told that on January 1st we need to pledge to completely reimagine who we are and the lifestyle we have adopted. While I certainly believe that the New Year is a time to reflect, I encourage you to remember the things you did right in the previous year and to not completely throw the baby out with the bathwater.
A few years ago, my New Year’s Resolution was to get my financial house in better order (cobbler, no shoes scenario). We only had one child at the time, but it had rocked my world and, as so often happens, some organization had fallen by the wayside. As a financial planner and advisor, I knew the basics of what needed to be done. In fact, the bulk of my days are spent getting other people squared away financially. I am embarrassed to admit that in many of the things I preach, I was delinquent. I quickly got the basics of my financial situation back in order, but it was obvious I needed to treat my family like I would a client. I needed to dive deeper and develop a routine and plan that I could carry forward for years to come. I think that secretly my overarching goal was to ensure that I could properly tackle this and then go back to easier resolutions such as “wash my face before bed.” It turns out that this project was not the behemoth I imagined, just like I tell clients. The difficulty was simply knowing where to start. I wanted to share some of the areas I considered during this project and what I learned.
Goals
We often remind clients that if you fail to plan then you plan to fail (technically we swiped this sentiment from Benjamin Franklin). While my husband and I had numerous goals we had loosely discussed, we had never sat down to formalize our priorities. We decided to start a tradition of having dinner out in the weeks before a New Year to discuss what we financially achieved the prior year and what we want to achieve in the next few years. As an aside, it is amazing what constitutes a date for two working parents with young kids. The focus of this discussion is to identify new and monitor the progress of three levels of goals: –
- short-term (under 3 years)
- medium-term (3-10 years)
- long-term (10+ years)
Beyond just considering timing, it is important to apply numbers to each goal. This might take some investigation and/or re-prioritization. For example, do you want to fully retire credit card debt in two years? An achievable payment plan needs to be developed where you also consider your budget and where you might have excess cash flow that can be redirected into tackling this goal.
An important note is that if you have not already, your first goal should be to establish an emergency reserve of savings for what I call the “expectedly unexpected.” You are going to blow out a tire at some point. Your child will inevitably trip over his/her feet and go to the ER. This will most likely happen when you are stressed out to the max and during an expensive season like Christmas. Before you make any big (or small) goals, please make sure that you have a baseline savings of 3-6 months of living expenses.
Budget
I am a big believer in the power of knowing what you spend. We all have blind spots and areas in our budget that bleed. As a Financial Advisor, my role is not to tell you how to spend your money but rather to help you identify where and how much you should save to reach your goals. If you are properly saving for the goals outlined in your financial plan, how you allocate your remaining funds is not my concern. I do think, however, that a New Year is a great time to decide if there is anything in your discretionary spending that no longer brings you joy. In other words, Marie Kondo your discretionary expenses. Are you paying for a yoga membership, but never making it to yoga? Are you buying excess clothing for a child who appears to be growing at an insane speed, leaving clothes with tags littering the closet (guilty)? Remember that every dollar you spend is a dollar you have not saved. The best way to accelerate the achievement of your goals is to save more. I have found in my personal experience that once I have identified my goals that I am more frugal simply because the goals I imagine are no longer just a pie in the sky. Every dollar suddenly has a job. I am pleased to also report that my children’s closets have far less outgrown clothing with tags since my resolution.
Insurance
While our firm does not sell insurance, I would be remiss if I did not say that a New Year’s reflection should prompt you to consider what changed and how it impacted your need for insurance coverage. One of the first medium-term goals my husband and I identified was an addition to our home. I’m happy to report that construction is currently underway! So, we identified that an action item for 2024 will include an increase in our homeowner’s insurance once the addition is completed. A new child on the horizon? Buying a new house? These joyous life events often have financial protection needs associated with them. Part of having a clean financial house is ensuring that you properly consider what safeguards need to be constructed.
Black Swans
I lost my mom in 2022. This has deeply shaped my life and the experience is something I draw from almost daily. When my mom was diagnosed with cancer, we had a mad dash to update her estate documents. While she was in a frenzy to change her documents as soon as possible, I was simultaneously realizing that I did not have a complete grasp on her (and my dad’s) financial situation. I had erroneously assumed my parents were, as many children do, invincible, but also that their financial affairs were in order. This was certainly true in some areas, and I am thankful for that. In the case of their estate documents, they had failed to review them as their children aged, instead employing a, “set and forget” approach. I can say from experience that this is not a wise plan. In fact, updating your estate documents while navigating a new, life-altering diagnosis is an extremely unenjoyable and stressful endeavor.
I cannot emphasize enough that if you do not already have estate documents and you have not recently checked your beneficiary designations, the time is now. This should happen annually moving forward as well as after big life events like a birth, divorce, or marriage. In the year that our daughter was born our dinner meeting takeaway was to review our Will and beneficiary designations, along with our insurance. Do not wait until a Black Swan event to ask important questions surrounding not only your own estate but also the estate of your loved ones. Are you the guardian of someone’s children? Each year you should make sure you understand what that entails. Do they have adequate assets or life insurance to ensure that everyone can live a similar lifestyle if something happens? Avoiding the uncomfortable questions has the potential to greatly impact the course of your life.
The one major piece of advice I can give as you consider the New Year is to advocate for you and your financial future. Too many people wait to consider these topics or delay seeking guidance until an emergency or crisis. Spend some time this year considering your financial wellness and exploring comprehensive financial planning as an investment in yourself and your future. If you need assistance in identifying your goals or would like to discuss implementing a goal in 2024, reach out to your Financial Advisor today!
In closing, I am pleased to report that this year I am back to the well-worn goal of washing my face every night.
Meet the Author
Disclosure: You should not assume that any information provided serves as the receipt of, or as a substitute for, personalized investment advice from Waverly Advisors, LLC (“Waverly”). This information should be used as a reference only. Talk to your Waverly advisor, or a professional advisor of your choosing, for guidance specific to your situation. Waverly Advisors, LLC (“Waverly”) is an SEC-registered investment adviser. A copy of Waverly’s current written disclosure Brochure and Form CRS (Customer Relationship Summary) discussing our advisory services and fees remains available at https://waverly-advisors.com/. Please Note: The scope of the services to be provided depends upon the needs of the client and the terms of the engagement.