The New Year presents an opportune time to take a hard look at your finances and create goals for the year ahead. To help you achieve financial freedom this year, I’ve created a list of my top ten steps to consider when crafting your 2019 financial goals.

  1. Create a plan. You’d be surprised how many people careen through life with no plan — just a hope that it will somehow all work out well for them. I’m here to tell you that the first and most important step you can take in your mission to achieve financial freedom is to commit to a financial plan. To help you do so, you should consider working with a qualified specialist, a CERTIFIED FINANCIAL PLANNER™ professional. Otherwise, it may be more challenging to navigate where you are going and if you are on track to arrive at your destination in the time frame you desire. And as life throws curveballs, speed bumps and opportunities your way, you need a plan in order to determine how to continue to move forward when faced with these challenges so you don’t derail your life’s work.
  2. Craft a budget! What’s more, stick to that budget! Budgets are the cornerstone to successful financial planning. They are living, breathing plans that reflect your intent and can be modified as your life evolves. However, do so thoughtfully and in writing to help you stick to the budget.
  3. Pay down all consumer debt. Unwarranted consumer debt is truly the evil character in your plans for a stable financial life. Get rid of it. And if you can’t pay it all off immediately, reduce it to its lowest possible cost by reducing the interest rate on what remains and paying off the highest rate debt first. Going forward, sticking to your budget will hold you accountable for your spending and will help you avoid future missteps in racking up consumer debt.
  4. Create a personal impound account. If you think about your mortgage, property taxes and insurance, you are probably using the impound account approach to paying the same amount for monthly for taxes and insurance even though those bills aren’t due in the same amount every month. We choose this option through our lender to help us smooth out the edges of spending. But did you know you can do the same thing for yourself with respect to ALL your inconsistent expenses? Think vacations, gifts, holidays and home/car repairs. While these expenses aren’t the same every month, you can, using your budget, know what your annual spending is per category. Simply take that total number and divide by 12 to know how much you set aside every month in your Personal Impound Account. Then, when it’s time to access the funds, they’ll be there for you without a lot of drama in your fluctuating monthly spending.
  5. Create an emergency fund. The best laid plans can still go awry. Set up an emergency fund with an amount that allows you to suffer some unexpected economic loss without destroying your finances. For instance, think of the expense you’ll need for family or pet illness, loss of job and perhaps major unexpected home and auto repairs. Then, define an amount that’s right for you and fund it. In the event that you need to access these funds, don’t expect them to magically replenish themselves. You’ll need to cut spending down the line by foregoing some discretionary spending to rebuild the account to the right amount.
  6. Make time for a comprehensive casualty insurance review every year. In my work with clients, I have found it is best to review their declaration pages and then call their agents to discuss. Often times, insurance agents want to be collaborative and have information you need to know about your property and your coverage. By performing this exercise, an insurance agent may be able to share the cost breaks you might achieve by increasing deductibles and then using the savings to increase more needed coverages. Make a New Year’s Resolution to annually call your agent for an in-depth review a month or two before your policy is up for annual renewal. If you have policies with multiple carriers, call each one and also investigate if consolidating might save you money and possibly time.
  7. Ensure your portfolio will match your needs in all the appropriate timeframes. We are truly testing our risk tolerance these days with the volatile daily changes in market valuations. But, do we actually have any idea how we will access our various assets when it’s time to pay for retirement? At least annually, and for those near or in retirement, I suggest you should meet with your investment advisor to review what you hold and why, and what the plan is to access your assets in different timeframes at least twice a year. During those meetings, discuss and determine if your various account holdings are appropriate for the timeframes in which you’ll need them. If not, develop a strategy with your advisor to make the right modifications, taking tax consequences and fees into account.
  8. Be philanthropic –but do so strategically. Begin by gaining an understanding of what you can afford to give and in what time frames. The next step is to determine how to balance the tax planning opportunities with your charitable intent. For example, if you are required to withdraw minimum distributions from your IRA, you might be able to donate directly to qualified organizations, thus lowering your adjusted gross income, which is a very powerful number on your return. Similarly, many donate low basis assets such as stocks and mutual funds, thus deducting the full value of the asset and avoiding selling and paying capital gains. The new tax laws have brought shifts to your planning, so work with your CERTIFIED FINANCIAL PLANNER™ professional and tax advisor to understand which approach serves you best.
  9. Begin the estate planning process. No one can argue the importance of a will. However, we sometimes don’t spend enough time planning for the assistance we might need while we are still alive. It’s time to sit down with your estate planning professional to review and possibly rethink all the different powers you have vested in others to help you if the time comes –  everything from managing your daily finances to making health care decisions to deciding long-term care services. Those whom you have named in the past may no longer be the correct choices, or you may need to name alternates if they are unable to serve. It’s important you have an honest conversation with those who are on your planning team as well as those whom you have selected to be “you” so that everyone is informed of the decisions and everything is in place to take care of you come what may. Review your decisions annually as your wishes may change.
  10. Communicate your wishes to successors your successors. Consider creating a book of knowledge where you are the main character and your wishes are the plot. In this book, you will need to include the lists of all your accounts and estate documents as well as the location of safes and safety deposit boxes. You should also include all important contact information for your CFP® professional, tax advisor, estate planning attorney and insurance agent(s). It doesn’t matter if the book is virtual or physical – what matters is that you communicate the location with those you have named to serve in roles on your behalf if needed. Every year, be sure to update the book. I suggest doing so every time there’s a major change in your life or annually, in February, because by then you should have all your year-end statements available. 

Simply remember: Create a plan. Review the plan. Improve the plan. Follow the plan. Lather, rinse, repeat.

Trust me, it works.

Wishing you a successful journey to your destination and continued enjoyment of achieving financial freedom this year.