By: OakPoint Wealth Management
It is common knowledge that financial literacy is sorely lacking here in the US, especially among younger generations. We take pride in the work we do with our clients and understand that children, family, and other loved ones may be able to benefit from basic financial planning concepts that are not typical dinner table conversations. As we enter the holiday season, it’s an opportune time to consider the financial well-being of others who may not have access to a dedicated financial resource. Embracing fundamental financial resolutions can provide a framework for sound financial decision making which can be taught to even the youngest children.
As 2023 comes to a close and we look back at the past few volatile years we will soon be diving yet again into another year of unknowns as 2024 unfolds I figured this would be a good time to talk resolutions. No, we’re not talking about the usual suspects like hitting the gym or mastering the art of avocado toast. We’re talking about financial resolutions. While not as sexy as the notion of losing a few pounds, budgeting, saving, investing, and taking control of your financial life will have you flexing your financial muscles in no time.
Resolution 1: First things first, let’s talk budgeting. I know, I know, the word itself might sound as thrilling as watching paint dry, but this is important! Creating a budget doesn’t mean you can no longer spend and be spontaneous; it’s more like giving your money a roadmap, and who doesn’t love a good road trip?
Start by tracking your monthly expenses. It’s always easiest to highlight the big stuff or fixed expenses like a mortgage payment, rent, car payment, insurance, etc. A budget should include provisions for the fun stuff, too. I recommend looking at your credit card statements from the past 6-12 months as this should give you a good indication of where money is being spent. This variable component of a budget is often underestimated and oversimplified because most have trouble comprehending that they do, in fact, spend way more than they’d like on activities such as dining out, entertainment, gas, gifts, personal care (haircuts, nails, etc.), travel, and whatever other little indulgences that you can cook up, including that late night ice cream run. Once you’ve put pen to paper and accepted the reality of what your current spending landscape looks like, set some realistic guardrails. Think of it as a personal finance diet, but with room for the occasional treat.
Resolution 2: Saving money might feel like trying to catch a unicorn – elusive and a tad mythical. But saving can be extremely fun! If you have attempted to save and have failed, I recommend starting small, like really small. It could be the cost of your morning coffee or that late night ice cream I mentioned earlier.
Consider setting up automatic transfers to your savings account, before you know it, you’ll have a tidy sum saved up for that dream vacation or an emergency fund for when life throws curveballs. The key here is consistency and making saving a habit, not a burden.
Resolution 3: With your savings plan running like a well-oiled machine, let’s talk about investing. I get it; the stock market can seem as mysterious as a black hole, but you don’t need a crystal ball to make smart investment choices. There are questionnaires and a human element to figuring out your own personal risk score in addition to your goals, which helps people like us determine where you are comfortable investing your money and looking at the big picture of finding objectives and completing those goals. Remember, when it comes to investing, time is your biggest asset. Cue the ‘it’s a marathon, not a sprint’ analogy…
Resolution 4: Ah, credit cards – the necessary evil of the modern world. While they can be your best financial friend, they can also turn into a beast if not tamed. Make it a mission in the new year to conquer your credit card debt and do your best to stay out of it!
Start by understanding your credit card terms. What’s the interest rate? Are there any annual fees? Then create a plan to pay off any existing balances. Remember, the goal isn’t just to pay off debt but to develop healthy credit habits and consistently stay out of credit card debt.
Resolution 5: Life is unpredictable, and having the right insurance is like putting a protective shield around your financial castle. I recommend taking some time this year to review your insurance coverage. Do you have enough coverage for your car, home, and health? Are you paying more in premiums than you should be? What do your deductibles look like? And don’t forget about the superhero of insurance – life insurance. Insurance may not be the most exciting topic, but it’s a crucial part of managing low-probability high-impact risks in a solid financial plan.
So, there you have it – five resolutions to make 2024 your best financial year yet. Remember, it’s not about perfection; it’s about progress. Each step you take towards your financial goals is a victory, and victories should be celebrated (within budget, of course).
If these basics sound overwhelming, there are people who want to help, by breaking everything down into understandable language, setting expectations and providing accountability to keep your financial life on track, an advisor can quickly become your best financial ally.
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