With the new year comes a chance to begin anew
Maybe 2020 wasn’t the picture-perfect year one might have imagined. But, it was the perfect metaphor to highlight key elements of financial planning.
From changes to budgets to job loss and market crashes, 2020 tested the fortitude of even the most financially savvy among us. The good news is as the New Year approaches, it brings an opportunity to begin anew.
Perhaps the March Madness that led to the great toilet paper shortage left you stranded. Now I’m not suggesting you need a shopping cart filled to the ceiling, but preparedness is important. Financially, you should have two emergency funds.
• The first: $2000 to cover an expense such as car tires or a furnace repair. You don’t want to have to use credit for these expenses and end up paying hundreds or more in interest payments.
• The second: three to six months of living expenses (bare bones, no cable or fancy seafood dinners) in case of a job loss or major medical emergency leaves you unable to work. This is one of the biggest lessons learned for many during 2020. It’s better to have and not need than to need and not have.
Did the graph on your
retirement savings statement look like the plans for the newest thrill-seeking roller coaster? Probably, but hopefully you stayed course and rode the roller coaster back to the top. The March market crash is nothing new. It was nothing more than a new protagonist for the speculators on the news to craft a story around to boost ratings.
Remember, no one can predict the market, but historically, the market has always gone up, down, up, down and back up again. I guess enough time passes between the last “crash” and the latest downturn where it can feel like the world is coming to an end.
For many, when the market crashed in March, they made a mad dash to the nearest exit, missing opportunities to regain their losses or add to their savings in the following months. As 2021 approaches, make sure you have a financial coach on your side that reminds you of the basics, takes the emotion out of decision making and keeps you focused on your strategy even during the most volatile of times.
Forget the fancy charts and graphs and the terminology that makes you feel like you’re in a medical school classroom. A good financial coach/adviser will keep it simple, give you confidence and guide you through the latest broadcast of the Financial Fear newscast.
If 2020 wasn’t the picture-perfect year, it’s time to start anew in 2021. Let’s take the lessons learned, prepare for challenges and plan for success.
Starting anew is an opportunity to regroup, refresh and take a step from where you are to where you want to go. Financially, assess the strength of your plan. Make sure you have a workable budget, ample emergency funds and a simple to follow strategy for retirement savings.
I wish you a Merry Christmas and much success in the New Year!
Ryan Daniels is a financial coach/advisor. He is a U.S. Army Veteran who enjoys continuing to serve, “Supporting communities by building financially strong families.” Visit his website at www.RFinances.com.