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 starts with a focus on budgeting, insurance, optimizing employee benefits, investing, and retirement planning. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals in their 30s and 40s 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 Financial Wellness Month, which means it’s a good time to remind people to plan and update their financial strategy.
Now is a great time to connect with your financial professional to discuss your financial situation and aspirations for the future. You should also assess if your financial strategy needs any adjustments or changes based on your lifestyle.
Defining Financial Wellness
The first thing to do is define what “financial wellness” means for you. This varies drastically 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 than a person who has enjoyed relative financial stability.
How, then, is “financial wellness” defined? First, ask yourself what you need to feel secure, financially speaking. Here are some 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:
- 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 meeting 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 for regular items, including student loans, credit cards, and other installment payments.
- Create an emergency fund reflecting 3–6 months of household expenses to establish 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 can 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 can mean not only a great deal to you in the long term but may also provide you some comfort in the short term. Schedule a time to discuss this with your trusted financial professional today.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your 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 June Newsletter, I provide a market update and a PDF guide with tips to help you handle inflation. I also shared a CNN article where I shared my thoughts on Crypto and NFTs, 5 savings mistakes people make when building their financial life. If you find any of this information helpful, feel free to sign up to receive future e-mail updates. If you find any of this information helpful, feel free to sign up to receive future newsletters via e-mail.
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