By Frank Legan
The new year is always a great time to reflect on your finances. It’s time to say goodbye to 2022 and jump-start your financial plan for 2023. Here, we share some tips to help you get the year started on the right foot.
1. Set SMART Financial Goals
The first way to jump-start your financial plan is to set financial goals. Do you have a goal for your finances or are you just crossing your fingers and hoping you have enough for the lifestyle you want?
Specific goals with defined timelines will help to determine the best course of action, including how much risk you can and should take with your money.
For instance, if you’re looking for a guaranteed source of income, then you will probably want to stick with investments that will provide long-term security. Conversely, if you are looking for substantial growth, then you might want to take on more risk and invest less conservatively. Every dollar in your portfolio should be working toward a specific goal.
Remember that the best goals will be SMART:
- Specific: The more you can identify exactly what you’re saving for, the easier it will be to work toward it.
- Measurable: As much as possible, try to identify how much your financial goal will cost. Do the research to figure out what you need to save so that you’re able to see tangible progress along the way.
- Attainable: Make sure your goal is realistic and achievable. This might require some self-reflection or reevaluation of your priorities.
- Relevant: Ask yourself which goals align with your core values. Remember that your finite assets will be split amongst your seemingly infinite list of wants. The more you can scale back your list to what is truly relevant, the quicker you’ll be able to achieve each goal.
- Timely: Identify the timeline for each goal so that you can prioritize which ones need to be addressed first and how much risk you can afford to take.
2. Build Up Your Savings
If there’s one thing the last several years have taught us, it’s that it’s crucial to prepare for the unpredictable. Whether it be a pandemic, a lost job, or rising rates of inflation, sufficient savings can mean the difference between staying afloat during uncertain times and not having enough when you need it most.
If you’re not saving already, take steps to start putting a portion of your income away every month. Usually, 10-15% of pre-tax income is a good guideline. Ideally, it is recommended that most people should have at least 3-6 months’ worth of non-discretionary expenses saved in a highly liquid, easily accessible emergency fund before saving toward other goals. If you have variable income, or your household only has one source of income, then saving up to 12 months of expenses can help safeguard your finances during times of uncertainty.
No matter how much you put away, consistent savings are the cornerstone of any comprehensive financial plan.
3. Reevaluate Your Risk Tolerance
As mentioned in Step 1, risk is fundamental to investing. Even “investing” by hiding cash under your mattress involves risk, since there’s always the chance of a break-in or increased inflation eating away at its value. To jump-start your financial plan in 2023, be sure to reevaluate the amount of risk you are taking in your overall portfolio.
It’s not uncommon for a portfolio to become unbalanced as the market ebbs and flows. What may have started out as a 60/40 allocation between stocks and bonds can easily become a 70/30 or 80/20 allocation, which is a significant difference in risk level. You may also find that you are too heavily concentrated in one type of asset or in one company’s stock. If this is the case for you, rebalancing and diversification should be explored.
Though risk is fundamental to investing, it’s also crucial that you aren’t overexposed to unnecessary risks. Take steps to evaluate your risk tolerance, based on your unique financial circumstances, stage of life, and personality, and be sure your investments align.
4. Partner With a Financial Professional
Regardless of where you are in the planning process or what goals you have set for your financial life in 2023, we’re here to help. Our unique planning methodology can help you take control of your finances and get a jump-start on the new year and beyond.
At Cedar Brook Group, we have the tools and expertise to help you set financial goals, build up your emergency fund, and reevaluate your risk level. If you’re ready to start planning for the new year, reach out to us at 440-683-9213 or firstname.lastname@example.org or schedule a complimentary introductory call online!
Frank Legan is Partner, Financial Advisor, and member of the Forward Look Committee at Cedar Brook Group, one of the largest independent wealth management firms in Northeast Ohio. Frank spends his days designing and implementing personalized financial planning strategies for corporate executives, closely held business owners, artists, families, and retirees. He specializes in lifetime income strategies, investment advice, and estate planning services. He also works with businesses to develop strategic and succession planning strategies. Frank has a Bachelor of Arts in Political Science from the University of Dayton, as well as a Master of Public Administration focused on municipal management from Cleveland State University. Prior to joining Cedar Brook Group, Frank was a financial advisor in the private client group at Merrill Lynch and with NatCity/PNC Investments. Frank is active in his community, serving on various councils, boards, and committees. Frank serves as Chairman of the Board of Directors for Catholic Charities Diocese of Cleveland, and is a board member of the Catholic Community Foundation. When he’s not working, you can find Frank spending time with his wife, Laura, their daughter, Reese, and their beloved collie, Charlie. Frank and his family are volunteers at St. Francis of Assisi church in Gates Mills. To learn more about Frank, connect with him on LinkedIn.