Happy New Year 2023! Simple Financial Goal Tune Up Time

The beginning of a new year can be full of resolutions and hopes of bettering our life. Part of that should include our personal finance priorities. Any financial plan needs to be reevaluated from time to time. The new year is the perfect time to perform our financial goal tune up. Best yet, it doesn’t necessarily require a major effort to ensure we’re on course to reach or stay on our financial plan. 

Simple Actions To Perform Our Financial Goal Tune Up

How’s that portfolio asset allocation looking?

Last year was certainly rough water with sentiments and the market swinging both up and down. Portfolios can enter into an evolution towards a different risk profile than we want. One that our investment risk tolerance isn’t aligned with. Our portfolio should maintain a stock to bond ratio designed to meet our financial goals while staying within our risk tolerance zone. 

The fight against inflation has brought rising interest rates and tighter monetary prices. There’s also worries of a possible recession, a disgusting war, global growth concerns, and politics both here and internationally that are kicking investment attitudes lower. The best way to weather the uncertainties is to make sure we have confidence in our plan. 

The new year is the perfect time to begin our financial goal tune up. It starts with evaluating our portfolio profile. Then taking action to rebalance asset allocations as necessary.

Anything new in our financial world?

A year’s time can bring a multitude of changes in one’s financial situation. We can experience changing life priorities, benefits, income, and expenses. Some good, some bad, but they all need to be evaluated for a successful financial goal tune up. 

While those still on the job might see a raise or cut in income, added required commute costs, or benefit changes. Even those of us on FIRE who are living life on our terms can see changes. 

We made some lifestyle changes to combat inflationary pressures that we hoped would be temporary, but will they? We’ve also seen a decrease in our health insurance costs because of our aging bringing about our transition to Medicare during this new year. 

The new year is the perfect time to make the time to plan for the necessary changes to maintain the perfect cash flow and ensure that we stay on our financial plan’s track. The optimism that comes with a new year can help us do what’s necessary to meet our financial goals while considering our current financial world realities.

What’s the emergency fund and cash reserves looking like?

Cash reserves in an emergency fund can ensure we stay on our financial path. Whatever our plan is, like having three to six months expenses of easily accessible cash in a safe, liquid cash account, it’s important to maintain that balance. 

We use a savings account. Money market deposit accounts or short-term certificates of deposit are also good considerations. My wife and I had to tap into our emergency fund last year. I came up short to meet higher than expected increases in property tax, homeowners insurance, and auto insurance. Ouch! It’s now noted and accounted for in our budget.

Our emergency cash reserve fund performed its duty as planned when needed as our first defense against financial setback. But now it requires replenishment to our planned allotment because it’s likely to be relied on again in the future. This emergency cash is our financial plan success insurance and an important part of our financial goal tune up.

Does your new year’s portfolio balance still measure up to your long-term income expectations?

Using our current portfolio amount in a retirement calculator is just a snapshot in time. Last year’s market shellacking was rough. Although I have hope of market recovery, seeing now if our numbers are still able to meet expected income expectations for as long as we are on the planet is a good way to see what adjustments, if any, are needed. 

Using the current portfolio numbers against our updated life expectancy years (we are all a year older) can be an eye opening exercise. Either there’s no issue to concern over or something has got to happen to improve the odds. 

If an asset allocation rebalance has already been determined as necessary, then checking progress later in the year will also be prudent. Especially if odds of portfolio success have turned against you after the dismal past year’s market performance. 

Ready for the inevitable and coming fast income tax filing? 

The best financial plan is one where we get to keep as much of our money as we’re legally entitled to. I’m happily reminded each year that our retired tax rate is less than the one we were in when we made all of our 401K and IRA contributions. Even so, I still don’t want to miss anything.

The other side of this is avoiding IRS scrutiny over any missed income on our tax return. The IRS always comes calling years after filing. This gift also brings interest and possibly penalties when our memories and records can be harder to find. 

However, the most immediate benefit of preparing for tax time earlier than later is that organizing the necessary documents reduces stress and allows us to be on track. As documents come in, I immediately put them in my Tax Folders. We use an actual manilla folder for postal and a digital folder for the electronic stuff received or downloaded. All are recorded against a checklist to make sure we have and get everything. 

If things go sideways, are beneficiary, POA, and other legal designations up to date?

I list this issue last because it’s the downer of an otherwise optimistic new year financial goal tune up. Many of us put this little gem off because, you know, becoming incapacitated or death is a bummer. But it’s an important part of our financial planning. Having a Will established is a great way to make sure that what we have goes where we want it to go. Having beneficiaries on our accounts will take priority of anything listed in a Will and most likely resolved quicker. All of our accounts both large and small should have beneficiaries listed. 

My wife was surprised to find that her old job ESOP only had me as a primary beneficiary even though there were secondary beneficiary slots to fill in. She then added our daughters in case something also happened to me. 

We’ve also experienced the bad fortune of a parent having none of us siblings listed as having Power of Attorney (POA). It created a huge problem maintaining her mortgage payments after a stroke incapacitated her and then her passing. We had to work under a “Guardianship” condition which was time-consuming and costly. 

Use this financial goal tune up time to consider whether something has been missed in this area or requires updating due to major life changes since they were initially established. 

A financial goal tune up is far simpler than an overhaul. Keeping the plan maintained and running smoothly costs much less than a surprise failure. Use having optimism that this new year will be even better than last as motivation. Take time to perform a few actions to ensure you’re still on your personal finance track. 

This post originally appeared at Leisure Freak.

Category: Personal Finance