Are you financially ready for 2022?

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In this article, you’ll learn about…

1. The importance of having written goals
2. Why blind spots can trip up your financial plans, and
3. The reason getting organized is a critical step for any financial plan.

The start of a new year can be a fantastic time to reevaluate your life and determine whether you’re starting the year off on the right foot. It’s a time of year where many are taking a higher-level look at their own life (especially in light of recent pandemic-level world events) and honing in on what’s going to bring them happiness and fulfillment.

You’ve undoubtedly heard of the idea of setting a ‘New Years Resolution’, but the unfortunate reality of such resolutions is that despite your best intentions, for a variety of reasons you’re statistically unlikely to achieve those goals set for yourself. 

So what should you do? Is the idea of setting new goals for the year a completely lost cause and simply not worth your effort? While theories and studies abound on those simple questions, here’s a suggestion: start with something that you can be sure needs to be addressed, your personal finances. Take time to self-assess and determine whether you’re financially ready to take on 2022. Determine what actions you need to take in order to get yourself financially set, and actually implementing those decisions, can leave you with a huge sense of accomplishment. In turn, that success can be parlayed into other goals and endeavors that might require a good understanding of your finances to determine their viability. 

What then, does it mean to be financially ready for 2022? This is something you’ll have to define more precisely for yourself, but in general terms the end product should be a feeling of empowerment and confidence. The combination of those two factors provides a sense that any decision you’re making is done with little to no doubt that you’re making a positive choice. A strong understanding of your financial data points (more on that in a minute) is an important element of this, but it’s also analyzing those data points in the context of your overall financial plans, emotions, desires and pursuits that’s most important to understand. For this year, a great place to start in honing in on these types of topics is to answer the three questions below.

1. Do you have defined, written financial goals?

To start, take some time to define your financial goals. That means not just thinking them up, but physically putting pen to paper and writing them down. In doing so, you create a level of accountability that you might not otherwise have. Going a step further, consider taking those written goals and putting them somewhere you’re going to see them from time to time. Maybe a bathroom mirror or in a drawer you open frequently at work. Again, accountability is what’s important here. Rather than simply thinking of a goal and then forgetting about it as soon as something comes along to distract you, by writing and posting your goals, you’re going to better hold yourself accountable by keeping them present in your life. 

2. Identifying Blind Spots

Second, based on the goals you’ve set, what strategies or approaches are you missing or overlooking? One of the biggest strengths an individual can have is an understanding and ability to admit when they’re wrong or don’t have enough information to make an educated decision about something. Taxes, insurance, investing, and determining your basic cash flow needs can each bring with them a myriad of decisions to be made. Often these issues have significant overlap between each other that can make it difficult to fully comprehend the ramifications of doing something.

For example, a lot of the logic that goes into tax planning is looking not only at your current year income and the strategies that may be available to try and mitigate your tax liability, but over the next several years as well. Instead of simply providing your tax preparer with all of your tax documents after January 1st, you should also be taking a look at what you could be doing in the present day to reduce your tax liability in years to come. Doing so requires an in-depth understanding of various 

3. Get Organized!

Lastly, are you organized? Do you have a complete understanding of how much money you’re earning and how much money is being used for expenses. Determining those values is a rudimentary start to understanding what your monthly cash flow looks like and will influence other financial decisions you’re going to make. Once you know your income and expenses, you can then begin strategizing around whether you need to increase or decrease those values to achieve your longer term financial goals. 

In the end, getting financially ready for 2022 is just like getting financially ready for any other year. The key to success is making sure you take the time to prioritize your financial goals, identify how you’re going to achieve them, taking steps to make sure you’re not missing things that could derail those plans, and finally taking action by getting organized and implementing your plans. Having an advisor to help with that process can provide immense value to ensure you’re not overlooking things and making sure that over the long term, you’re able to do the things that bring you happiness.