Setting Your Financial Goals for the New Year

| December 4, 2019

by James W. Abbott

Never spend your money before you have it.”  -Thomas Jefferson

It is difficult to develop disciplined and consistent financial habits towards achieving long-term retirement planning goals.  I speak with my clients on a daily basis and find a lot of commonalities that separate them from their hard-earned money:

  • Cost of living in New England
    • “$3,500-$7,000 a month mortgage…”
  • Saving for college fund
    • “Is it really going to cost $250,000 to send my daughter to Stanford?”
  • Aging family member living with them
    • “Even with long-term care insurance, we are having trouble keeping up.”
  • Having to celebrate Patriots, Bruins and Celtics Championships…
    • “Our kids are spoiled!”

As a former professional hockey player, I had goals established early on in my life to move up the competitive ladder before ultimately reaching the professional ranks.  I had to take my time and put the work in at every level: youth hockey, high school hockey, junior hockey (NAHL) and college hockey (UNH), before my invite to even tryout for the Pittsburgh Penguins.

Now as a financial advisor, I see myself more in the coaching role with my clients to keep them on track as their busy professional lives and schedules change rapidly!  My goal is to create a solid financial foundation for my clients based on their unique situation and risk tolerance.  With the start of a new year, January 2020, this is the perfect time to establish new goals to set you on your way to a satisfying retirement.

Here are some key coaching points I like to discuss with my clients:

1. What are you contributing to your company 401(k) plan?  And are you at least hitting the company match?

  • 2020 IRS limits have been raised to $19,500 + $6,500 if over 50 years old.
  • $57,000 max with employee contribution

2. What are your major liabilities?  And, what are the interest rates at which they need repaid?  Which one should you pay off first? 

  • Owe $20,000 at 1.99% on your car?
  • Owe $400,000 at 3.45% on your mortgage?
  • Owe $37,500 at 9.99% on credit card?

3. Do you have appropriate life insurance coverage?  Have you considered long-term care insurance?  Does your spouse have coverage?

  • Also, is 2x your base salary for life insurance really enough to cover paying off your mortgage, getting kids to college, (income replacement) leaving money for your spouse to live on for the next 35+ years?

4. Have you considered consolidating your two previous 401(k) plans into your current employer plan or thought of an IRA? 

  • What funds are in the previous/current 401(k)?
  • What are the fees associated with the plan?
  • Do you have one concise login where you can see all of your assets/liabilities?

The list could go on much longer, depending on one’s personal situation, but the larger goal is to understand:

There’s no better time to take inventory of one’s financial life than the start of the year!  Even if you discover that you’re already doing everything right, at least you’ll have the peace of mind that things are moving in the right direction toward a long-term goal.  In studying your financial habits and developing a plan, you’ll have the peace of mind that your daily actions are contributing to long term achievement. Adopting a more proactive and intentional mindset around finances will likely pay dividends, literally and figuratively.

Having a trusted expert advisor during this process keeps individuals informed, motivated, and accountable.

James Abbott

James W. Abbott, AIF, PPC is vice president and financial advisor at Claro Advisors, LLC.

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