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Is My Money Improving My Life?

Photo of author, Joshua Johnson, CFP®.
Joshua Johnson, CFP®
Financial Strategist

A new year typically brings out the optimism in everyone. We’re excited about the potential opportunities in front of us. All over, people are establishing new resolutions, creating goals they would like to accomplish this year. In the age of Covid, we see more people focused on improving their mental health and quality of life; but the most common goals revolve around exercising more, losing weight, spending more time with family, reading more, and managing finances.

Some are very determined and put a detailed strategy together to reach their goals. Others, unfortunately, fall prey to dwindling motivation, unrealistic expectations, and even a misalignment with their personal values, which leads to more than 70% failing within the first month. It becomes a vicious cycle of setting the same unrealistic goals, with little to no support or accountability, and getting the same “non-result” year after year.

If you’re like me, one of the goals you might establish is to get your financial house in order. This may include retirement planning, investment planning, tax planning, budgeting, and an array of other items. When it comes to retirement planning, the focus is usually on obtaining some magical number to accumulate so that retirement can become a reality. This thinking puts a lot of emphasis on your return on investments as well. Although these areas are important, a key ingredient that is typically forgotten is focusing on your Return on Life. You might be asking yourself, “What the heck is my Return on Life?” I’m so glad you asked! Simply put: Are you living the best possible life with the money you have?

How do you know if you’re living your best possible life in your current financial situation? Here are three steps to consider:

Step 1: Review Your Fiscalosophy

This process encourages you to review what is important to you. It starts with reviewing your fiscalosophy. Fiscalosophy allows us to identify our beliefs regarding key money matters. Over our lifetime, we all have had experiences that led to our current perspective on money, whether good or bad. Those experiences we’ve incurred can dictate how we manage money, how we invest, how we prepare for retirement, how we manage debt, and so on. Depending on our experiences, it can make a huge impact on us, especially when we are in a position of receiving a large sum of money such as from an inheritance, sale of a business, a lottery prize, or a lucrative sports contract. Unfortunately, in many of these situations, if folks don’t have the proper financial guidance, they have depleted their newfound assets within 3 years or less due solely to their perspective on money.

Step 2: Determine Your Financial Comfort Level

The next step is determining where you are and are not comfortable in your financial situation. Whether it be your level of debt, your investment strategy, your current spending habits, or maybe your ability to retire. Addressing these key issues allows you to move forward to focus on your Return on Life — and make sure you have a good balance. Remember, money is a tool to help serve you and allow you to live your best life, not the other way around. There are so many other things we should focus on besides accumulating money, such as how can we use the money to make each day meaningful. Determining a sense of purpose for your financial plan has created some of the happiest retirees.

Step 3: Prepare and Plan

We all experience major transitions in our lifetime. The next step is to seek professional guidance in helping you identify and prepare for those transitions. Whether it’s caring for your parents, retirement, funding college for your children, downsizing your home, or creating a succession plan for your business, life transitions can impact your wealth positively or negatively. And, in turn, your overall well-being will be impacted by how effectively you prepared for those transitions. Being proactive will help reduce the stress in our lives as well as minimize the financial impact.

Accomplishing your 2022 resolution to getting your financial house in order is achievable. By understanding your current perspectives on money, determining your comfort levels, and understanding the impact of your money on your future life transitions, you can create a strong foundation for your financial plan. The team at McKinley Carter is here to guide you through this process to help you live your best life!

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