Allworth co-founder Scott Hanson looks ahead to the New Year and shares three must-dos that can be universally beneficial.
With the holidays fast approaching, I urge you to make your New Year’s financial resolutions soon.
Because with 66% of people planning to make at least one financial resolution before the start of 20241, it’s already getting crowded in the resolution line.
But don’t just stop at one.
If you make one and keep it - and I sincerely hope you do - then great! And if you make more than one, and some of them stick, while some eventually don’t, you’ll still have taken the time to consider your financial situation, and that’s never a bad thing.
What minimum goals should everyone set for 2024?
Here are 3 that should serve as a baseline.
1. Pay off high interest rate debt
I don’t believe that people should feel guilty about debt. We are all adults here. And a full 77% of Americans have some type of obligation.2 Things happen.
But the biggest factor influencing the cost of debt is your loan’s interest rate. And with rates being what they are, let this be a reminder to clients and readers alike, that, more than at any time in recent history, debt is costing you more, and that should serve as a motivation to bring those balances down.
2. Don’t let pessimism cost you your future
The vicious combination of high interest rates and still-high inflation has put a lot of people on edge. I’ve spoken to countless callers to our Money Matters podcast-radio show, as well as workshop attendees, who have all but thrown up their hands in disgust over economic factors they can’t control.
After all, why even try and save more? And why make a resolution to save more if the cost of living is going to be so high that it vacuums up all your forward progress?
No one, and I mean NO ONE knows what the future holds.
But if I had a dollar for everyone who has ever said something to the effect of, “I don’t know why I didn’t start saving more earlier, I certainly could have, and if I had, I’d have plenty of money.”
Well … that would be one tall stack of dollar bills, indeed.
Remember, markets rise and fall, but history has shown that slow and steady wins the game: The key markets have always moved higher over time.
Recession. Interest rates. Inflation. I hear you. Why make a resolution to save more when you are just going to fall behind?
Because when you invest prudently and consistently with a fiduciary advisor, even when the markets are flat, you are buying more little pieces of investments. And if markets follow their historical pattern and gain value over time, your little pieces exponentially increase in value.
3. Start (or solidify) your emergency fund in 2024
The key reason to have an emergency fund is so that in the event something unexpected happens, you are not relying on your credit cards, or a loan, or that “in-law” you don’t like with 11 cars, to help you cover the expense.
When you do not have cash ready in reserve, almost any pothole can become a bottomless pit.
And you may be wondering how can you build an emergency fund when your cash flow is tight?
If you do not have at least three months, and preferably six months, worth of cash available, here’s what I would recommend:
- Identify a savings account with a reasonable return (there are now free, online savings accounts, that are FDIC insured, and which pay 5%, or more)
- Decide how much you can reasonably save. If you are partnered, can the two of you produce $500 total per pay period? (In a mere six months, you could have the seedlings of a viable emergency fund.)
- If you absolutely do not have extra income each month, then are there some expenses you can cut or reduce? Can you change your cell phone plans, gym or club membership, eat in restaurants less often, or cancel a few online subscriptions?
I’m hoping you can.
Optimism. The other side of the leaf. Fit. Healthy. Driven. Being all the many wonderful things that you have always wanted to be.
The New Year is a time for … well … renewal.
If you’re not yet a client of Allworth Financial, contact us for a free, in-person or video evaluation of your investments and your retirement readiness.
Just as your New Year needs a resolution, your future needs a plan.
1 2024 Financial New Year's Resolutions Survey Findings | The Motley Fool
2 Average American Debt - Ramsey (ramseysolutions.com)