It’s that time of the year when we hear a lot about what to expect next year. Regrettably, the track record for that stuff is miserable. So, we don’t play that game.
Better to think about the actions you can take now, that’ll make a difference in a decade. Liz Ann Sonders, Chief Strategist at Charles Schwab, put it well when she said, “It’s not what we think we know about the future, it’s what we do along the way.” This is also the secret to health, relationships, skill-building and so on. The compounding of little things done consistently over a long time add up to big things. So, we’ve composed a short list of gentle financial nudges for the New Year. Even checked it twice!
Spend less than you earn. A good indicator for this is to notice how much credit you’re using. If there’s a growing balance of charges generating interest expense from month-to-month, you’re spending more than you’re earning. If you have net savings, that’s a huge plus. It opens the door to an improved financial future.
Have deep liquid savings.
This is usually called an emergency fund. We rather call it a reserve. That way we avoid kidding ourselves about what’s an emergency and what just needs to get done. The size of the deep reserve is up to you. You know that life serves stuff up. And it’s totally impartial about who you are, the timing, where you live, or whether or not you’re prepared.
Review your insurance coverages.
The major ones are life, health, home, motor vehicle, and personal liability. Life changes usually happen slowly, then suddenly loom large. Like wrinkles. You really don’t want to start buying life insurance at age 50. And you don’t need to be covering your kids if they’ve grown up and are on their own.
Put money away for long-term goals.
A down payment for a home, education, the trip of a lifetime, charitable giving, retirement, the next generation? Kudos to you if you are. If nothing is happening here, consider this a nudge to action.
Monitor your credit condition.
People with great FICO scores get better rates on loans. Period. The difference between great and not-so-great FICO scores can mean as much as a 20% difference in monthly loan payments.
FICOs above 760 are great; 700-760 are pretty good. Check with your bank or credit card company for free FICO scores. Do this at least annually.
While you’re at it, go to
annualcreditreport.com at least once a year and take a look at your credit situation. It’s free and safe. No upselling. No spam. Check to see that everything’s correct and that no one is using your identity for their credit.
In a decade, small actions like these, made year after year, will mean much more to your financial well-being than what inflation does or how your crypto goes. And they are things you can easily get started with right now.
We’re here to have those nudge-y conversations with you whenever you’re ready.
May you have a Joyful Holiday Season and Thrive in 2022!
James Cosgrove, CFP, Plano, TX jim.cosgrove@verizon.net 972-489-0262
Jim Cosgrove, Partner, San Jose, CA jimcos42@gmail.com 408-674-6315
