Set Your Financial Course for the New Year
“… The old has gone, the new is here!” II Corinthians 5:15
It’s a new year, making it the perfect opportunity to tackle your finances with a fresh perspective. But where do you start? And how can you plan when you do not know what the next 365 days will hold?
Fortunately, we’ve made planning a bit easier for you by breaking it down into four steps.
Step 1: Reflect and Reset
Before we can look forward, we need to look back. How does your financial position compare to what it was 12 months ago? Did you experience any financial successes or setbacks? This reflection helps set the stage for this year’s planning.
Now, look ahead to the next 12 months. Maybe you have a major life event on the horizon, such as a move, marriage, or a new baby. Perhaps you’re considering a career change or will reach a milestone age. While some life events will be positive and others negative, all of them will factor into your financial goals for the coming year.
Step 2: Consider Your Cash Flow
Now that you know what you need to plan for, you can start to evaluate your income and expenses for the coming year. Are you saving enough? Do you need to adjust spending patterns in one area to cover additional spending in another? Will you be financially prepared if an emergency occurs?
Even if retirement isn’t on the horizon, the start of the year is also a good time to consider your long-term saving. Are you taking full advantage of the employer match in your workplace retirement plan? Is there an opportunity for you to enroll in a Health Savings Account or Flexible Spending Account?
For retirement planning, consider contributing to an IRA or Roth IRA if you’re eligible. You could plan for steady monthly contributions over the next year, or you could make one lump-sum contribution early in the year to give your money more time to grow.
If you’re taking debt with you into the new year, this may be the year to get serious about erasing it. Does your current cash flow allow for extra payments to pay down debt faster? Can you explore options for consolidating debt to reduce interest payments?
Step 3: Prepare and Protect
A little proactive planning can save you lots of money, time, and possibly heartache in the future, whether it’s this year or 20 years from now. Talk with your advisor about tax planning strategies that might help you reduce your tax bill in the future. He or she might suggest converting a tax-deferred IRA to a Roth or selling assets at a loss to offset capital gains.
The beginning of the year is also a good time to review your insurance coverage across all areas: health, life, disability, and property. Is your coverage still adequate for your family? Have you updated your policies to reflect changes in your life? Is it time to consider adding long-term care coverage? It’s also smart to review your estate plan, ensuring your will, trusts, and beneficiary designations still match your wishes. Again, your advisor can walk you through these decisions and make sure the proper protection is in place for you and your family.
Step 4: Give to God
Finally, remember that none of this life would be possible without God’s providential hand. As Deuteronomy 8:18 puts it, “But remember the Lord your God, for it is He who gives you the ability to produce wealth.” Your work isn’t done until you have a plan for giving and using your financial resources to further God’s kingdom.
Are there ways to increase your tithe or donations to Christian organizations? Can you automate your giving to make it easier to track? Putting a plan in place covering when you’ll give, how much you’ll give, and who you’ll give it to makes it more likely that it will happen over the coming months.
Financial planning is championed throughout the Bible, which lays out the principles of wise financial management: planning ahead, saving diligently, avoiding unnecessary debt, preparing for emergencies, and recognizing His provision in our finances. God doesn’t call us to be perfect with our financial management, but He does call us to be faithful stewards. By being proactive with your finances and prioritizing faith, family, and wise stewardship, you can build a legacy that endures for years – and generations – to come.
We know the complexities of financial planning can feel overwhelming. If you would like to speak to a Blue Trust advisor about your unique situation and how to plan, invest, and guard your assets, please reach out to blog@bluetrust.com or call 800.841.0362.
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