By Kim Segal, CFP®
How are you doing on your New Year’s resolutions? Hopefully you aren’t part of the 80% of Americans who discard their resolutions by February, (1) but if you are, remember that there’s nothing magical about January 1st. No matter where we are in the year, you can set new intentions and make the small steps necessary to make your goals a reality.
Now that we’re more than a month into 2022, it’s an ideal time to revisit your goals, especially your financial goals. Use this check-in to review your financial plan to make sure it’s on track for the rest of the year and beyond.
1. Set 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 two 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. Either way, consistent savings are the cornerstone of any solid financial plan.
3. Reevaluate the Risk in Your Portfolio
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 2022, 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
Facing challenges with a partner by your side always makes it feel less daunting. So no matter where you’re at in the planning process or what goals you’ve set for your financial life, consider enlisting the help of a financial professional.
At Catalyst Investment Management, we have the tools and expertise to help you set financial goals, build up your emergency fund, and reevaluate your risk level to help you take control of your finances. With the end goal of providing financial peace of mind through market wisdom, integrity, and strong personal relationships, we are here to support you, guide you, and navigate any financial challenges you may face.
If you’re ready to get your financial plan in order and set yourself up for a strong financial future, you can schedule a call today by reaching out to us at (617) 610-0587 or emailing [email protected].
About Kim
Kim Segal is co-owner and CERTIFIED FINANCIAL PLANNER™ professional at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 20 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn.
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