Mitch's Mailbox

January 5th, 2023

3 Smart Financial Resolutions for 2023

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Trisha H. from Daphne, AL asks: Hello Mitch and Happy New Year. I have a new year’s resolution question for you. If you could advise folks to make 2-3 financial changes in the new year, what would they be?

Mitch’s Response:

Happy New Year to you as well! I enjoy these types of questions, because they involve planning and goal-setting – both of which I love to do.

That being said, we all know how new year’s resolutions tend to go: everyone makes big plans at the turn of the year, then by the spring the enthusiasm has fizzled and we’re back to old habits. So, to answer your question, I want to offer financial ideas/changes that I think are practical, easy to stick to, and above all, will be effective and efficient improvements to your financial well-being.1

Here are three.

I’m a big fan of automated saving and investment strategies. In the realm of new year’s resolutions, they are easy to implement and can also be set for the entire year – meaning you’ll stick to them.

Online banking and brokerage tools these days allow investors a lot of flexibility in moving money between accounts with a few clicks. Some ideas here would be to automatically move 5% of every paycheck into a brokerage account to then be invested, or maybe you can move $100 a month into a child or grandchild’s college savings account. For people who are still working, you could automate contributions into retirement and taxable brokerage accounts, so money is saved and invested every month. The list goes on.

How to Prepare for Retirement Amid Volatility and Recession Fears in 2023!

When the headlines focus on ‘worrisome stories,’ it’s easy to get caught up in short-term decision marking. Instead of falling into this trap, here are some important factors that investors should consider before retirement:

Considering these factors can be a daunting task, but there are four simple steps that can help you plan for retirement! If you have $500,000 or more to invest, get the scoop on these simple steps with our guide. Click on the link below to get your copy today:

Download “4 Steps to Managing Your Retirement Assets!”2

If you have 2023 goals to save more, or perhaps to save into different types of accounts for different objectives, I’d recommend automating your contributions. Doing so will minimize or outright eliminate the possibility of falling short of your goals.   

In my view, every person or family should have approximately 10-12 months’ worth of income stashed away in a savings account. Knowing what your number is means knowing what you and/or your family spend every month, which includes mortgage payments, utilities, subscriptions, groceries, gas, etc. If that number is $6,000/mo, for instance, then I think you should have about $60,000+ in cash in a savings account.

Not enough Americans have emergency savings. According to a survey from Betterment at Work, about 59% of employees have an emergency fund, which is 7% less than it was in 2021. That means about 40% of people have no emergency savings plan, which is not great.

The good news for savers today is that the rising interest rate environment has pushed up yields on risk-free savings accounts at major banks, with some accounts paying more than 3% annually on balances. If you don’t have nearly enough emergency savings, building up to 10 months’ worth of income and expense needs can seem daunting. But just remember tip #1 about automating, and approaching this goal systematically over time.

Finally, a financial new year’s resolution I’d suggest is to make a conscious effort not to do something. 2022 was a volatile and challenging year for equity and fixed-income investors, and I’m sure there were many instances where it was tempting to sell or to change course. But doing so often means abandoning a long-term plan, and many investors forget that long-term plans take into account bear markets and volatile years. What a long-term plan does not factor in are investors shifting course and getting in and out of markets, usually at just the wrong times.

If volatility and uncertainty in the new year are weighing on your ability to stay the course, I’d suggest revisiting your asset allocation to see if perhaps you have too much exposure to risk assets relative to your risk tolerance. This should not be a knee-jerk decision, however. It should be a well-thought-out plan and a shift to an asset allocation that still addresses your long-term growth and income needs.

Lastly, I recommend that investors, especially those nearing retirement, start taking steps to transition to retirement with confidence. We can help you do this in our exclusive guide, “4 Steps to Managing Your Retirement Assets3.” In this guide, we share insight on how to:


If you have $500,000 or more to invest, click on the link below to get your copy of “4 Steps to Managing Your Retirement Assets.”

Disclosure

1 CNBC. December 12, 2022. https://www.cnbc.com/2022/12/12/5-money-moves-to-make-now-to-ensure-financial-success-in-the-new-year.html

2 ZIM may amend or rescind the “4 Steps to Managing Your Retirement Assets” guide for any reason and at ZIM’s discretion.

3 ZIM may amend or rescind the “4 Steps to Managing Your Retirement Assets” guide for any reason and at ZIM’s discretion.

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