posted on December 29th 2015 in Your Financial Advisor with 0 Comments /

It’s not long before the holidays have passed, the calendar flips over, and we begin at least a few weeks of accidentally writing the wrong year on anything we date. (We’re thinking that’s not just a financial planner problem… right?)

As always, a new year comes with the pull to declare a new set of resolutions. What will be different in 2016? What will be better about 2016?

While you’re considering different workouts, foods, and habits that can better your day-to-day, we want to turn your attention to your wealth, and the intentional goal-setting that can set you up for not just a prosperous new year, but many prosperous years to come.


Three steps to realistic financial goals

When we think “financial goals,” all too often we jump to the things our wealth can buy us: that luxury sports car or the sandy beach house on the coast. While “goals” like this can be incredibly motivational, we highly encourage you to put a bit more structure around them, so that your driveway has a much higher likelihood of serving as home to that Maserati in the future.

Try approaching your financial goals this time around with the following three steps:

  1. Reflect

You can’t plot a course to a destination without knowing where you’ve come from. What did the last year look like for you, financially?

A few big picture things to look at from the last 12 months:

  • What did your budget look like over the last year? You might not have set a budget last year, but you certainly spent money each month. What did your spending look like? Evaluate where the major expenses came from and what categories accounted for the most spending — and if you were working with a budget from the beginning, measure them up against it.
  • What changes occurred in your situation? When looking at changes, consider your career, your marital status, your family growth, your housing, and other assets/areas that impact your finances. When you note the changes, also note how they impacted your finances, or will in the future. Did the change in career alter your health insurance plans, or did you reassess the value of your home to adjust your taxes? Each change will impact your future planning.
  • What financial milestones did you hit in the last year? Maybe you saw a significant rise in income. Or you were able to pay off the lingering student loans or the mortgage that had been weighing you down. Whatever it was — and no matter how big — celebrate the wins of the last year that will also likely impact your finances moving forward.

Earlier this month, we detailed 10 smart year-end planning moves that encourage you to review your 2015: from tax planning to college funds and beneficiary review to charitable giving. Why spend so much time reflecting? Not only is it important to celebrate accomplishments before moving on, but it’s incredibly important to have this information on hand as you set realistic goals — especially if you bring on a financial planner to help you chart your path.

  1. Project

With a plethora of information on hand regarding what the last year looked like for you, you’re ready to start (realistically) looking forward.

This is where you focus on priorities. Begin by asking yourself the following questions:

  • What would you like to make happen in the upcoming year? When we talk about goals, we look at three different timelines: short-term, mid-term, and long-term. In order to prioritize in planning, categorize your goals, and pull out the short-term goals as your 2016 priorities. Are you preparing for a new baby? Planning on retiring? Planning to buy that second home you’ve been dreaming about? 
  • What needs to happen for each of these priorities to be a reality? The best way to approach a goal is to break it down. Perhaps your goal in the next year is to build up a solid base for your first child’s college expenses. A good first step? Researching 529 and other accounts meant to help with educational expenses. Perhaps your goal is to make a significant career change, venturing out to start your own business. A good first step? Knowing how much you’d need in an emergency account, to cover 3-6 months of expenses while you’re in transition.

These two questions are more complicated than they look. Short-term goals require near-immediate action and can easily be overwhelming as there are often a slew of options for getting started toward them. This is where the actual planning comes in — and where we highly recommend speaking with a Certified Financial Planner who can confirm that you’re on the right path — and who can help you make headway on mid- and long-term goals even while you keep focus on the short-term goals now.

  1. Protect

This is the oft-overlooked piece of financial planning when we’re in the thick of the day-to-day, whether in our individual family lives or business operations.

We set goals for growing our wealth and using our assets, but we don’t consider how we might protect ourselves in the event of unexpected occurrences.

These unexpected situations can arise from a multitude of life shifts: loss of a job, personal health issues, a new baby, a forced move, parents who become ill, asset depreciation, natural disasters, and much, much more.

Building an emergency fund helps you prepare for the unexpected. While you can’t possibly know for certain what the future holds, you can prepare to build a financial reserve that helps when it arrives. Having a firm handle on your goals helps you understand how much of a buffer your financial reserve should provide on top of that to cover the unexpected.


Taking the next step

It’s easy to spend our day-to-day thinking only about the expenses we incur in the present — that flight to visit your daughter at school; the coffee shop visit; the dental appointment; the gas in the tank. But in order to set yourself up for financial success in the future, you’ve got to make the decisions now that align with your priorities for yourself and your family in the long run.

As we turn to a new calendar year, there’s no better time to get started. Reflect on your past, project your priorities for the future, and put plans in place to protect what you have. And remember this: your goals will change. The unexpected will become the expected. Life will take you for a ride. With a financial planner by your side, you’re much better equipped to enjoy it. Get in touch to see how our team of fee-only financial planners can help you plan today.

about the author: WorthPointe Wealth Management

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