About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
January Is National Financial Wellness Month
January is Financial Wellness Month, a time to remind people to plan and update their financial strategy. It’s a great time to connect with your Financial Advisor to discuss your financial situation and aspirations for the future. It’s also a good time to connect to see if your financial strategy needs any adjustments or changes based on your lifestyle.
To help guide you we’ve created this What Issues Should I Consider At The Start Of The Year 2022 checklist. It covers fundamental considerations, including:
- Personal issues
- Cash flow issues
- Asset and debt issues
- Tax issues
- Insurance issues
- Legal issues
Defining Financial Wellness
The first thing to do is define what “financial wellness” means for you. This might drastically vary from person to person. It is informed by who you are, where you are coming from, and what your experiences with money are. A person who has had serious financial troubles in their life might have different expectations from a person who has enjoyed relative financial stability.1,2
How, then, to define this? First, ask yourself what you need to feel secure, financially speaking. Here are the questions to consider:
- How much should you have saved?
- How much income should you be bringing in each month?
- Where are you at with your debt?
- Would things be simpler if you carried less debt?
- How fluid is your cash flow when it comes to expenses that are not urgent (taking your family out to dinner or on a small trip) versus larger financial goals (such as buying a new kitchen appliance)?
- Finally, and perhaps most importantly, will you be able to retire at your target age?
Financial Wellness Goals
Thinking about financial wellness is often a matter of setting goals for what you can accomplish now and what you can work on to make it a part of your larger financial strategy. For now, consider taking these actions:3
- Have a values-based conversation with the decision-makers in your household, meaning any tax-paying adult who contributes income and shares responsibility for the bills. This could be your spouse or a family member. Make sure that the non-essential things you are spending money on line up with your commitments to meet your financial needs. This is not a “stop getting lattes” conversation; it is a “are we spending money on the things that matter?” conversation.
- Consider automating payments, especially towards regular items, including student loans, credit cards, and other installment payments.
- Creating an emergency fund reflecting a minimum of 3–6 months of household expenses will afford you a stable foundation going forward. If that seems too ambitious, build the fund a month at a time until you reach your goal.
- Make regular contributions to your retirement accounts. Take advantage of any matching contributions you might get from your employer.
- Make long-term financial goals. If you are thinking in terms of buying a house, for instance, let that guide your overall financial strategy.
- Is becoming totally debt-free an achievable goal? It can be if you make it a priority. That said, being totally debt-free may be a difficult task for most households. For that reason, it may be better for you to focus on your other goals first and make debt freedom a target for a later date: for example, being debt-free by retirement.
These are, of course, not hard and fast rules. As mentioned above, every individual has their own specific definition of financial wellness. Some of these examples might feel like a long reach. Others, you might already be practicing. The good news is that with careful practice and judicious scrutiny, many people can gain a feeling of satisfaction and even pleasure from maintaining financial wellness.
Having your financial strategy in place not only can mean a great deal to you in the long term but also may provide you some comfort in the short term. Schedule a time to discuss this with your trusted financial professional today.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. So if you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
In the August Newsletter, I explore how you should invest money for your short-term goals after you've established an emergency fund. I also discuss how a Financial Advisor can help you avoid emotional decision-making with U.S. News and World Report and how to know if your Financial Advisor is the right fit for you. There are also blog posts where I outline how to complete a mid-year financial check-up and 5 college planning mistakes to avoid.
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Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special, or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.