2023 New years Financial Resolutions - Part 1: Laying the Foundation

By Britta Ferguson

2022 was quite the year with volatile markets, rapid interest rate hikes, along with uncertainty internationally. Each event had an impact one way or another, but were out of our control. As we ring in the new year, I encourage you to control what you can control: your personal finances. This article will help you evaluate your finances and create a game plan for 2023.

1. Getting Started- Know Your Numbers

a. This can be the most challenging part because it takes effort and it’s also a reality check. Fortunately, in today’s digital world, figuring out your inflow vs. outflow can easily be found on your financial statements.

b. Start with your bank and credit card year end statements to see your total deposits vs. withdrawals. You can break it down monthly, but some months tend to be more expensive than others. These numbers are to establish a starting point for 2023 and less about the day to day. We’ll focus on the day to day in a future step.

2. Break it Down: Establish a High Level Budget

a. Start by breaking down your lifestyle expenses into two main categories:

i. Essential expenses- the amount needed for daily living and known expenses.

ii. Discretionary expenses- everything else.

b. Define how you’re saving:

i. Common ways to save:

1. Workplace savings plan such as a 401k/403b.

2. Savings accounts.

3. Investment accounts.

c. Outline your debt:

i. List all of your debt and the interest rate for each one.

ii. Write down the actual dollar amount of interest you paid for each debt in 2022. This tends to be eye opening, especially when it comes to high interest credit cards.

iii. Specify the timeframe (if known) for when each debt will be paid off.

3. Categorize: Lay it Out

a. Write down ALL your financial goals, whether lofty or realistic, and categorize each one as a need, want, or wish.

b. Put a dollar amount and the action needed to achieve each one: save more or spend less.

c. Determine if it’s a one-time goal, such as a remodel, establishing an emergency fund, car purchase, etc. or if it will be ongoing.

4. Prioritize: Create a Timeline

a. Now that you have a better understanding of your goals, prioritize them within the category from most important to least important.

b. For each item, define a reasonable timeframe of when you’d like to accomplish the goal. A simple rule of thumb is:

i. Short-term- today and within the next two years.

ii. Medium- term- within the next two-seven years.

iii. Long-term- more than seven years.

Remember, this is the starting point and will continue to evolve over time. I encourage you to take the time, evaluate what’s important, and have the honest conversations about your money. These steps may take effort now but typically pay off in the long run. In the next article, I’ll cover actionable ways to manage and pay off debt.

Cheers to 2023… you made it!

Britta Ferguson, CFP® is a financial advisor with the Gensler Group at Wealth Enhancement Group. For more information, please contact her at bferguson@ wealth enhancement.com or 619-5541300. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor and affiliate of Wealth Enhancement Group®. Wealth Enhancement Group is a registered trademark of Wealth Enhancement Group, LLC.