How Does One Financially Prepare for a New Year? Here are Some Actionable Tips
Contributed by Shawn M Johnson, ChFC®, CLU®, CLTC
As we approach the New Year, it seems like an excellent time to reflect on your financial situation and to set goals for the future. Financial preparedness is crucial for a successful and stress-free year ahead. In this article, we will outline the essential steps to ensure your financial well-being in the coming year.
1. Get a handle on your cash flow
Understanding your cash flow and setting clear and achievable financial goals is the cornerstone of financial preparedness. Start by assessing your current financial situation, including income, expenses, and debts. Allocate specific amounts for essential expenses and don’t forget to include savings and an emergency fund in your budget.
2. Build an emergency fund
Building and maintaining an emergency fund is a financial safety net. Aim to have at least three to six months’ worth of living expenses saved in this fund. It will protect you in the event of unforeseeable expenses and will save you from having to resort to high-interest loans or credit cards.
3. Pay down high-interest debt
If you have outstanding debts, create a plan to pay them down. Prioritize high-interest debts like credit cards and personal loans. Evaluate how to best allocate your surplus cash flow to balance the competing demands of debt repayment and long-term wealth building.
4. Create a savings and investment plan for the future
Savings and investing for the future are essential. Beyond your emergency fund, allocate a portion of your income to long-term savings and investments. Maximize contributions to tax-advantaged accounts, like Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), as well as retirement vehicles such as a 401(k) or IRA, to secure your financial future. Additionally, explore other investment opportunities that align with your risk tolerance and financial goals.
5. Plan with taxes in mind
Understanding your tax situation can lead to significant savings. Familiarize yourself with tax deductions and credits applicable to your circumstances. Consult with a tax professional to ensure you’re making the most of tax-saving opportunities.
6. Reduce your exposure to risk
Review your insurance policies to make sure you have adequate coverage for your needs. This includes disability income insurance, professional liability (malpractice), life, health, auto, home and umbrella coverage. Adjust your coverage as necessary to protect your assets and loved ones effectively.
7. Set SMART goals
Specific, measurable, achievable, relevant, and time-bound (SMART) financial goals for the New Year will help you keep track of your progress. Whether it’s saving for a down payment on a house, starting a family, or funding a dream vacation, having clear objectives will motivate you to stay on track and make sound financial decisions.
8. Monitor your progress
Monitoring financial preparedness is an ongoing process. Regularly review your financial goals to measure progress. Adjust your plan as needed, especially when life events or circumstances change. Consistent monitoring will help you stay in control of your finances.
9. Partner with a financial professional who specializes in working with dentists
While it may be appealing to do it yourself, your financial future is far too important to resort to a DIY approach. It’s critical to work with a financial professional who can help guide in ways you can grow your wealth and protect what is most important to you. That said, not every financial professional will do. Find a financial professional who has experience in working exclusively with dentists; they will have a level of familiarity with the specific needs of your career that will benefit you in the long run.
Conclusion
Preparing financially for a New Year is a proactive step toward achieving your financial aspirations and maintaining peace of mind. By creating a budget, building an emergency fund, managing debt, saving, and investing wisely, and staying informed about taxes and insurance, you can set yourself up for a prosperous and secure future. Remember, financial preparedness is a continuous journey, and with dedication and careful planning, you can make the most of the year ahead.
Treloar & Heisel, an EPIC Company, is a financial services provider to dental and medical professionals across the country. We assist thousands of clients from training to practice and through retirement with a comprehensive suite of financial services, custom- tailored advice, and a strong service-focused support team. For more information visit us at www.treloaronline.com.
Treloar & Heisel, Treloar & Heisel Wealth Management, and Treloar & Heisel Risk Management are all divisions of Treloar & Heisel, LLC.
Investment Advice offered through WCG Wealth Advisors, LLC, a Registered Investment Advisor doing business as Treloar & Heisel Wealth Management. Treloar & Heisel Wealth Management is a separate entity from The Wealth Consulting Group and WCG Wealth Advisors, LLC.
Insurance products offered separately through Treloar & Heisel and Treloar & Heisel Risk Management.
Treloar & Heisel, LLC. and its divisions and WCG Wealth Advisors, LLC do not offer tax or legal advice.
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Shawn Johnson is vice president, Business Development, with Treloar & Heisel.
www.treloaronline.com
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