The new year is a time for setting intentions and hitting the ground running. Many people turn to losing weight, exercising more, or being more mindful when thinking of resolutions. But what about your finances? The beginning of the year is a great time to sit down and create a checklist of all you want to accomplish financially in the new year. This checklist can set you up for success not only in January but for all of 2022.
Before making new goals for yourself, it is always important to give yourself a chance to look back at your prior year's goals and all the progress you made. It's ok if you didn't hit every milestone you aimed for-just be honest about what went right and what went wrong. That way, you can better identify what you want to work toward in the new year and how you can meet those goals more effectively.
It's also a good idea to assess any significant life changes you may have had in the past year, such as retiring from your job, buying a second home, or hitting the magical age where you can finally file for Medicare. These events may prompt different goals to become a priority for you.
Once you've landed on your goals for the year, make sure your budget is in good standing to reach them. If you determine that you will need more money in your budget to reach your goals, you want to make sure that you are taking that income in the most tax-efficient way possible. Can you afford to put more income on your tax return if you are still working? If you are retired, will adding more income affect your Medicare premiums or how much of your Social Security is taxed? Once you have a better sense of how your budget has shifted, you can make your goals both specific and measurable. Rather than saying, “In 2022, I want to spend the winter in Florida,” instead, you would say something like, “In 2022, I'll spend January through April in Florida and have a budget of $5,000 per month.”
One last thing you need to start doing is planning for tax season. While it's understandable to avoid thinking about taxes until you absolutely have to, the beginning of the year is a great time to give this annual task some extra thought. You can start your tax-season prep work by getting organized for your tax reporter. You can then consider what your year will look like financially and determine if any tax planning strategies would make sense for the year, such as Roth Conversions.
If any of these new year resolutions spark a change for you, make sure you have these discussions with your financial advisor. You always want to make sure your goals and your financial plan work together to set you up for success in your future.
The Financial Enhancement Group is an SEC Registered Investment Advisor. Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory services can be provided by Financial Enhancement Group (FEG) or World Equity Group. FEG and World Equity Group are separately owned and operated.