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December 30, 2020
Crafting a financial plan can mean a lot of different things to a lot of different people. January is a great time to refocus and recommit to your wellbeing. Consider including your financial health in this year’s goals. While everyone’s situation is different, here are three categories to give you an idea of where to start.
If you fall into this category, you have an uphill battle ahead of you, but getting organized and getting started will lead to results sooner. First and foremost, track your spending and create a monthly budget. This will help you recognize outlier spending and find creative ways to save. Next, build an emergency fund of $1,000-$2,000 in a savings account. This will be for any unexpected expenses that life may bring. Any dollars over and above that, start to aggressively pay down your debt. Start with higher interest rates (usually credit cards) and work your way down the line. If you have the time and energy, consider a side hustle. Whether driving for a ride share company or working at your favorite ice cream shop, there are a lot of ways to earn additional income on the side to help reach your goals sooner.
With minimal high interest rate debt, you are off to a good start. Start working on building a significant emergency fund. The general rule of thumb is three months’ worth of expenses (not earnings) for a family with two working adults, or six months for a family with one working adult. Once your emergency fund is established, look to your next set of goals and consider investing to reach them. While investing does have a level of risk, historically it has allowed for higher returns than a traditional savings account. When it comes to investing, you want to consider your time horizon and your asset allocation. These two factors will help drive your success. Once you have determined how much you plan to save, automate it. Having monthly automated transfers gives you a better shot at sticking to your plan. As you receive raises or situations change, consider increasing the automated amount before you become accustomed to the new paycheck.
Maybe you have been great at setting aside money for years, but now is a helpful time to revisit your plan. Do you have a good understanding of where and how your money is invested? Are your investments working well together? Are you saving for your goals in tax efficient ways? Are you on track for retirement? While these questions are too extensive to visit in a short article, there are many resources to start these conversations. Gather your financial statements and review your current holdings and plans. If you feel overwhelmed or would like additional support, a financial advisor can help craft these conversations and guide your goals.
Graham Rigby, CFP® – Financial Advisor
Tampa – 100 N. Tampa St., Suite 2400, Tampa, FL 33602
Ocala – 2701 SW 34th St., Building 100, Ocala, FL 34474
© 2020 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.