January: Financial Wellness Month
With the holidays in the rearview, January is a great time to ensure your finances are organized, up-to-date, and ready for the year ahead.
Since January is also Financial Wellness Month, we thought it would be helpful to share five steps to evaluate financial health as you begin the new year.
- Determine your net worth. It’s calculated by simply taking the value of your assets and subtracting your liabilities. A net worth calculator[i]can make this calculation easier. Maybe it’s been a while since you calculated yours, and you would like to do this with your advisor. Just give us a call or make an appointment!
- Review your debt-to-income ratio. Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. It’s a helpful percentage that reveals whether you have too much[ii].
- Evaluate your housing costs. Given the volatile real estate market in recent years, the house you’re in is likely the best place to stay—unless a job or family circumstance forces a move. Regardless, move to keep housing expenses 30% or below[iii]your total monthly income.
- Consider investments. Experts recommend investing at least 10% to 20% of your after-tax income[iv]for retirement. Review your current savings rate and consider inching it higher if you’re not currently meeting this threshold.
- Set financial goals for 2023. Whether you want to fund a family vacation, pay off your car, save for home renovations, or pay down debt, now is the time to modify your budget to reflect your goals for the year.
Don’t forget—you may need to pay off lingering holiday expenses or that big splurge from the past year this month, and you will certainly want to think ahead to taxes and tax preparation fees coming up in April.
If you have questions or would like another set of eyes on your finances this January, give the office a call or book an appointment. We are happy to set up a time to chat and ensure you start the year feeling confident about your financial future.
[i] Ramirez, M. & Bundrick, H. (2022, December 2). Nerdwallet.com. Net Worth Defined and Calculated: What Is My Net Worth? [Online] Available at: Net Worth Defined: What Is My Net Worth? – NerdWallet
[ii] (2022, February 24). Nerdwallet.com. What’s Your Debt-to-Income Ratio? Calculate Your DTI. [Online] Available at: Debt-to-Income Ratio: How to Calculate Your DTI – NerdWallet
[iii] Leonhardt, M. (2021, July 15). Cnbc.com. Use the 30% and 28/36 rules to figure out how much you be spending on housing. [Online] Available at: How much of your income you should spend on housing (cnbc.com)
[iv] Jackson, A. (2022, June 18). Marketwatch.com. Inflation sits at a 40-year high. So you may want to rethink this ‘rule’ about how much of your income to save and invest. [Online] Available at: How much should I invest in stocks? – MarketWatch
