As 2022 comes to an end your mind may be filled with a litany of concerns, plans, and future outlooks. With so much happening in the world it is easy to lose track of what truly matters in your life. Politics, inflation, the economy, or even foreign wars have filled the mainstream and led many people to put their time and effort into areas that they have very little chance of making a real difference.
Going into the new year it is crucial to pull yourself back from the clutter of global news and instead focus your efforts on impacting your own life, more specifically your own finances. Whether your portfolio underperformed, or you did not get the raise you were hoping for, 2022 may have been an uphill battle for your finances and financial plans.
Rather than going into the new year with a plethora of dos and don’ts, the first step in getting the right mindset for 2023 is having positive outlooks and goals. Resolutions, especially surrounding your financial mindset, can lead to negativity in your mindset. The healthier course of action, and first step in getting your mindset right, is to set positive goals, reduce negative resolutions that say, “Don’t do this!”, and think positively about how you wish to see improvement in your life.
Beyond promoting the benefits of positivity, this article will discuss aspects of your financial plan to key in before 2023 to help optimize your next financial year.
Table of Contents
Optimize Your Cash Flows
Cash flow is one of the most important aspects of any successful business. Often times people see cash flows as a term that is only relevant for businesses, but this is not the case. Optimizing your personal cash flows can allow you to save or invest more money to build your wealth for the future.
Cash flow is calculated by taking your income and subtracting all your expenses, typically in a given period of time like a month. The goal should always be to have a positive cash flow and optimizing your cash flow means increasing that positive number.
There are three main methods of optimizing your personal cash flow. The first method is to reduce your expenses leaving you more positive cash flow. The second method is to increase your recurring income. This would involve a bonus or raise in your main source of income, typically wages or salary. The third method is to introduce another income source into your cash flow. With the rise of money-making methods through the internet, many people opt to start side hustles such as online bookkeeping or drop shipping to introduce additional income.
Build Your Personal Retirement Plan
At the end of every year, you should take the time to review your retirement plan. This includes going over your 401(k), investment portfolios, or IRAs to ensure all the figures are accurate to your knowledge and your money is invested where you want it to be.
It is especially important to be on top of your retirement portfolio if you are anticipating retirement in the coming years. Upon review of your personal retirement portfolio, you may feel the need to invest a higher percentage of your income per period or reduce your allocated percentage depending on the situation and goals you have for your future.
Prepare for Your Family’s Future
For many, the goal of building wealth is to ensure their family, children, and grandchildren are prepared for the future. Setting up a trust or 529 plan can be the first step in preparing your family for higher level education in the future.
Certain trusts and 529 plans are designed to help individuals save money for their children’s education. These savings vehicles are often accompanied by tax advantages due to their purpose of saving for education.
The end of the year is an excellent time to create or edit educational savings and help prepare your family financially to accomplish incredible things with their education.
Optimize Your Tax Savings
Taxes can be a large hit to your income stream. With the right guidance from your financial advisor, there may be opportunities for you to optimize your tax savings for your personal finances or your business.
Especially if you are a business owner, there may be tax advantages that you are not aware of that can help you earn more and spend less on taxes. Talk to your tax expert and review your finances to see if you are eligible for tax savings that you are not aware of.
Create Your Unique Financial Plan
Financial plans are like snowflakes, no single one is exactly the same as another. Whether it is differing income levels, expenses, or financial goals, your financial plan can look completely different than someone who is seemingly in the exact same financial position as you.
The first step in creating your unique financial plan is understanding what your goals are. Some people are future oriented and will sacrifice spending in the short-term to save for the future. Some people are the exact opposite and will save less to spend more now. Regardless of your mindset, creating a financial plan with positive cash flows and optimized expenses is crucial for financial health.
Creating a financial plan alone is a complex and daunting task to take on. You should meet with a financial expert to help guide you through the best course of action. Because your financial plan is a crucial part of your everyday life, health, and happiness, it is important to partner with financial experts that not only care about you but are experts in their field.
Additional Resources
Fragasso Financial Advisors, financial advisors Pittsburgh, PA has been providing high-net worth individuals, families, businesses and institutions with financial advice for decades. Their financial advisors welcome a conversation regarding the goals described in this article, and more.
Investment advice offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.
