One of the scariest times in my life happened in 2013. I was faced with one of those moments in life where a decision has to be made, and you hope to God that you make the right one. Without any more suspense, 2013 was the year that my business partner and I decided to form our company, Vertex Capital Advisors.
As if forming a business wasn’t daunting enough, my wife and I were expecting our first child in July of 2013. Looking back, it’s hard to fully recall just how unnerving that time was for us. Elizabeth and I had been married for almost 2 years, and we were about to be new parents.
My biggest concern was the timing of everything. Did it make sense to try and start a business with us being so close to having a new baby? How would I manage my time effectively? What would our personal finances look like?
I was spinning my wheels.
One day, Elizabeth just said, “You better go now. If you don’t go now, you won’t go when she gets here (our daughter).”I don’t really know why these words gave me such peace, but just like that, the decision had been made. It was time to go for it, and the rest would sort itself out.
I’m sharing this story because we’re on the cusp of another new year, and millions of Americans will set resolutions that are destined to fail. I’m not smart enough to know all of the reasons why people don’t stick with their goals, but as a financial advisor, I may have some insights about setting financial goals for 2021. Here’s some completely unsolicited financial advice for kicking off the new year:
- For anyone that has not created a financial plan, the best thing you can do is START NOW. One lie we tell ourselves is that we’ll get our financial lives in order when we (FILL IN THE BLANK). Then we become experts at moving our own cheese. Don’t expect your timing to be perfect because it most likely won’t be.
- If you have a financial plan, consider some fundamental areas that need to be updated or tasks that need to be completed. Do all of your financial accounts have appropriate titling and beneficiary designations? Do you have a current will and power of attorney documents? Are you maximizing the savings in your retirement accounts or health savings account?
- Are you too scattered? One thing that tends to happen as we do life is we have small financial nuggets and accounts that are all doing their own thing. A common google search revolves around 401k rollovers. Do you have several old retirement accounts that could be consolidated?
- Tax season will be upon us before we know it. How tax efficient are you? In our practice, we have something we call SAM’s Ratio, which refers to the percentage of income you pay each year to Uncle Sam. If you’re like most taxpayers, you want Sam’s ratio to be as small as possible or optimized for a specific financial goal like ROTH conversions.
- How are you managing risk? Do you have adequate life insurance protection? What about disability insurance? Have you reviewed your home and auto coverages? Do you have an umbrella policy? These may seem like basic ideas, but being underinsured when life take a wrong turn can be a financial catastrophe. Think about how many families had their lives permanently altered because of Coronavirus. Let’s avoid taking risks that we can transfer away.
- For some investors, you can now see your retirement date or retirement age coming on the horizon. If this sounds like you, I encourage you to get started on creating your retirement income plan. I’ve found that many people wait too long to put their retirement planning strategies into place. As you get closer to your retirement years, adverse market events can have a huge impact on your plan.
- If you are planning for retirement in 2021, don’t ignore the critical considerations of when to claim social security and understanding your options with Medicare. Both of these topics can be simple or complex, depending on your personal situation. Take the time to work with a skilled retirement planning expert that can educate you on your options.
- For other investors, you may be hearing the siren song of IPOs and cryptocurrency assets. Now is a great time to sit with a financial planner and go over your investment policy statement. If you don’t have a process for evaluating and selecting investment options, this is a great goal to create for 2021. Don’t be shy about asking for investing help.
This is a good list to begin, but I don’t think it’s as comprehensive as it could be. One thing I’ve learned by working with clients is that each and every household economy is unique. We may use the same financial tools, but our values and desires are different.
That’s what makes personal finance so fascinating to me—each of us is writing our own story. Next year will be my 8th year as a business owner, and it’s been an incredible ride. I’ve learned some extremely valuable lessons on this journey, but if I had to do it all over again, the only change I would make is that I would have started earlier!
I don’t know what you are planning for 2021, but I hope you are focusing on things that will bring you joy and happiness. While honing your money skills is important, don’t forget to create room for enjoying the fruits of your labor. I picked the title of this post because I’ve heard it a few times in my life.
Before I got married, someone told me, “There’s never a perfect time. You just have to go for it.”
Before my wife and I started our family, we were told, “There’s never a perfect time to have kids. You just have to go for it.”
I think this same concept applies to our financial lives—the timing may never be perfect to create your plan, change careers, take your dream trip, or retire on your terms. But, we can get started. So, let’s focus on that. You’ll be amazed at what can happen once you decide to take control of your financial story. There’s never a perfect time, you just have to go for it. Let’s get started!