Start With The Basics - 2021 Goals


By Nick Licouris, CDFA®, CFP®
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The new year is in full swing. Yet again, it's that time of year when we reflect on last year's resolutions to see how we did and what goals we will set for ourselves this year. How did you do? What were the things you accomplished, and what did you let slip through the cracks? Financial resolutions are often one of the highest priorities; the idea of "spend less, save more" promises that never seem to make it past the first few months. Here are a few easy steps to get your finances on track for 2021.

"Plans are nothing; planning is everything." ― Dwight D. Eisenhower

Start with the basics - Budgeting

Do you ever wake up and wonder, where does all my money go each month? Well, let's take a look at your cash flows in and out. Budgeting is one of the most important items to start your financial plan with, as it gives you a visual of the flow of your income. Monitoring your income and expenses can help you increase your net worth over time. It's not about how much money you make, it is about how much money you can save that makes the biggest difference.

1. Begin with creating a realistic savings goal for each month. Ensure that this strategy will work for you.

2. With help from a financial planner, determine how much you will be expected to save in order to meet those goals (Retirement, House down payment, College Education).

I encourage putting away a minimum of 10% of your gross pay into your investment accounts (including retirement & medium-term accounts.) Ideally, being able to save 20%-30% of your gross pay is an excellent goal to have.

Do you have enough for emergency expenses?

Have you ever been in a tight pinch that month and had to put that unforeseen expense on the credit card? Depending on your profession, you should always have anywhere from 3 to 6 months of emergency expenses in your bank account. This allows you to have access to cash immediately in case an unforeseen event occurs, and you will not have to tap into your investments or put them on your high-interest credit cards. Once you have enough saved, it is important to get that excess money you are able to save monthly to work hard for you. You work hard for your money, it's time for your money to work hard for you by not leaving it earning pennies in the bank. If you were to leave your excess money in the bank you will be losing out to inflation over time.

Paying off the Credit Cards:

Who doesn't love points? While we all love to get our travel points, leaving a remaining balance that's getting dinged by outrageous interest rates these days (10-25%) is not a smart move. This will hinder you from saving and investing your money over time. If you find yourself over-spending each month, go back to your budget and see what you can cut back on. By letting your balance accrue interest you are hurting your chances of building your emergency fund and the ability to start to save for your financial goals. Make it your mission to fully pay off your credit cards every month.

Look at Your Investment Accounts & Consolidation

2020 was a whirlwind of a year. Take this opportunity to look at your overall investments and ensure they are still aligned with your overall strategy to achieve your financial goals. This is a perfect time to work with a professional investment advisor to help determine your risk tolerance and run projections to make sure you are still on track for your goals in life.

Americans are changing jobs more often than they have in the past, and this can result in multiple investment accounts and a headache to remember all of them. It is not uncommon for someone to have several 401(k) plan accounts with former employers. Once the number of accounts you have has been reduced, it may be easier to make changes, coordinate your overall asset allocation, and track performance.

Being on top of your finances this year will allow you to have peace of mind that you're on the right track to pursue your financial goals and financial freedom. It starts with a simple budget and holding yourself accountable. This is why it's so important to have a financial planner on your team to be there every step of the way throughout your life changes.

Securities offered through LPL Financial, Member FINRA ( Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor. Gerber Kawasaki and Gerber Kawasaki Financial Advisors are separate entities from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance does not guarantee future results.

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