Cents & Sensibility —
Creating a new to-do list
for the new year

Beth Peabody

Throughout 2021, this column provided a range of recommendations and suggested actions to improve your financial literacy. More specifically, the advice included calculating a monthly budget, identifying various buckets of savings, examining retirement plan features, establishing time horizons for investments and considering estate planning decisions.

The new year provides an opportunity to review last year’s actions and create a to-do list for this year. The previous 12 columns included advice that should be considered on an annual basis. An action for this month is to review these recommendations and determine if further analysis, or an update to your previous list, should be considered. Previous Cents & Sensibility columns can be read here.

Establishing financial goals can be part of the new year resolutions, but just as one might decide to diet or exercise more, as time marches on these resolutions are often pushed aside. This column attempts to provide advice each month that makes the decision-making less complex and suggests simple actions that are empowering.

Readers are being inundated in January with news headlines urging you to “Spend Less and Save Smarter in the New Year” or “Spend More in the New Year.” These conflicting ideas, and the advice offered in the articles, can be confusing and cause an overwhelming urge to do nothing. However, not having a plan is not a plan.

A suggestion to begin the new year with confidence, and to continue to improve your financial security, is for you to be willing to discuss financial goals with others including partners, family and friends. For some reason, such a discussion is difficult despite the importance of the topic. An opening question to assess is “how am I (or are we) doing?” To avoid what could be an uncomfortable discussion about salary, compare your success in terms of percentages and not dollar amounts. You may ask, “How do my monthly net income allocations percentages compare to others?” This question is a friendly conversation starter.

A good model suggestion is to allocate 50 percent of your monthly net income to fixed amounts, such as housing and living expenses. Twenty percent can be allocated to emergency savings and the remaining 30 percent can be allocated to entertainment and travel expenses.

The percentage allocation can change each year depending on circumstances, but the model highlighted above is a good place to start. For example, the past two years have disrupted many budgets as items set aside to spend on entertainment or travel may be accumulating. This year maybe those dollars could be allocated to improve your savings bucket amounts.

January’s second action item is to have the conversation! If you are worried about aging family and friends, encourage them to have the conversation too.

Beth Stegner Peabody is CEO of Stegner Investment Associates, Inc., and a graduate of Sacred Heart Academy.

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