In these early days of January, we tend to reflect back on the year that has passed and look forward to the year ahead. This is a good time to consider setting some goals and strategies for achieving these goals!
Make a Plan / Review Your Plan
At Sycamore, we encourage our clients to establish S.M.A.R.T. goals. In particular, all goals (financial or otherwise) should have five basic characteristics.
- Specific: Your goals should target a specific area for improvement (e.g., spending, saving, debt, investing, estate planning, etc.).
- Measurable: Your goals should be easily quantified or have an indicator of progress to help you know when you have achieved them!
- Achievable: Your goals should be able to be achieved in a specific and reasonable time period (e.g., within 2018!).
- Realistic: Your goals should aspire for something that can realistically be achieved to prevent otherwise inevitable disappointment.
- Timely: Your goals should have a specific time frame for achievement.
In particular, setting achievable goals that won’t leave you feeling disappointed seems particularly important. Remember, the goal of financial planning is to progressively improve your financial position at a sustainable pace specific to you. At Sycamore, we work to move our clients forward a little each year along the path of a well defined financial plan.
Finally, if you don’t already have a financial plan, working with a planner to get a plan in place is a great place to start! If you already have a financial plan, then pull it out, dust it off, and restart your efforts to work through your Action Plan! It doesn’t matter how well you tracked your plan last year. Let that go, and start working on your plan anew.
Spending / Saving
For some, setting a goal of spending less and saving more in the New Year might be the way to start. This can be especially true if your monthly or annual cash flow is right at breakeven and you have financial goals that require more money. [Spoiler alert: most financial goals require more money.]
For others, setting a goal of spending more and saving less might be a good way to kick-off 2018. Yes, you heard me right — while one financial risk is outliving your money, another of equal importance is not living well and enjoying the results of solid financial planning. Of course, you’ll want to spend wisely and not create a risk of running out of money. Which leads to the importance of understanding your spending.
At Sycamore we believe you are in a stronger position for financial decision making when you have a very solid understanding of how much money you spend annually, where you spend it, what you can control, and what you cannot. This is why all Sycamore financial plans recommend that clients have a spending plan — not a budget, but a plan that identifies what you spend. Checkout our Spending Plan section on our Resources page for more information.
After you have a spending plan, the next step is to check-in on your debt and assess whether you are on track to pay it off within the intended term while incurring the least interest cost necessary. An important part of this debt check-in is assessing the quality of the debt. At Sycamore, we generally don’t recommend accelerating debt payoff for asset-backed debt where the interest rate is below a reasonable rate of return for invested assets. Other debts, however, should be evaluated for accelerated payoff. The debt payoff strategy that will most benefit you should be evaluated with your financial planner and in the context of your broader financial plan.
While we’re on the topic of your credit, you should review the pros and cons of applying a credit security freeze to your major credit bureau accounts, and considering putting a freeze on all of yours and your family members accounts. We have a brief summary credit security freezes for your review and action.
Investing for Your Future
Finally, once you have a hold on your spending/saving and debt, you should begin targeting surplus cash flow for investment to help fund future, longer-term financial goals (e.g., home renovation, extended travel, early retirement, etc.). At Sycamore, we can help you develop a holistic financial plan, assess your spending/saving/debt needs, and ultimately develop a specific investment strategy for your financial goals.
Other achievable investment goals that will help put your plan in action include the following.
- Consolidating old employer retirement plans to simplify your portfolio and allow you to minimize fees.
- Increase your contributions to retirement accounts for short-term and long-term tax advantages as well as compounded tax-deferred growth.
- Review the fees in your investment accounts and assess them for reduction.
So take 2018 by the horns, get your plan set, and start working down your Action Plan for financial success in the New Year!