Net Worth is something very simple but it tells you a lot about your situation. By spending the time to aggregate your various financial accounts, home, car, business, or other valuable ‘stuff’, you can start to get organized. And it also helps surface ways of saving of making more money in the future! Maybe you have a fund with a high cost or can combine multiple accounts to simplify your life. 

The other thing that I like to do at the start of the new year is to come up with a Savings Plan. This is where you decide how much money you will save in 2022 and where to put it. This is important so you start the year with a proactive plan!

Tune in to hear the details!

Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/

Transcript
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Mike happy new year. 


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nice. Very good. Very 


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I would bring up a couple of financial planning tips, a couple of financial planning, things that I do with my own clients that I thought would be useful for the listeners to hear about and maybe implement themselves in order to start up the year, start the year on the right foot. 


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So I'm going to guess here I could be wrong is the very first step in the process to have a clear idea of what your goals overall and for the year are. 


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met, how do you know. 


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Without knowing that, so that is the first piece, but I'm not going to talk too much about that today. We've talked about a few times. I'm sure it'll come up on the show throughout this year. Today is a little bit more nuts and bolts that I want you to automate some things and get set up for success for this year. 


That I do at the start of the year with my clients. One is track their net worth and we'll talk about what that is and why I do that. But I do that here right at the start of the year. Just as a landmark to do that once a. And the other thing that I like to do with all my clients is set up the 20, 22 savings goals, budgeting or savings. 


However you want to phrase it, but knowing where you're going to be putting money throughout the year. Now this a precursor to that, Matt is knowing your goals. So I'm not gonna talk about your goals or the listener's goals in particular, but once, you know where we're trying to go this year, five years, 10 years, Then you need a savings plan. 


e saving plans. We had one in:[:[:[:[:

And that gives you a single number that is quote-unquote how much you are worth? 


financially in a, in dollars. 


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It's actually getting a lot harder for even regular people to keep track of their assets, because you probably had a job at some point that had a 401k. Then you had another job that had a 401k, and then you had another job that had a 401k and you had all of those things and they're managed in different ways. 


And when you started the job, you had to sign a piece of paper saying you're in favor of that. And. You may be still getting statements. You may have only a loose idea of like how to log into a program and figure out what's in those accounts. How hard of a process is this really in, as you said, nuts and bolts fashion, is this a laborious thing to go through? 


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They're like, oh yeah, I had this old account back at this other thing, and it's got a couple thousand dollars in it. And so part of the process, if you haven't done this before, is building that awareness, where are all your accounts? What, how much money do you have in them? What is it invested in? 


I need this old account with:[:. And so if you watch the old:[:[:

Do I have any idea where those shares are? They're in my name, kind of me. I don't know. I just don't know. Okay. 


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Is a pain in the butt. I believe that's been my experience, but do you try to have your clients go through that? 


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So we don't have so many things floating around. Unfortunately, there can be consequences. So sometimes you do not want to write. Those 401ks into an IRA. In fact, I often do not want to do that. The reason why is we're getting into Roth conversions. And if it's, if you have money in an IRA, then you have tax consequences for doing that. 


So therefore it's a complicated picture depending on your situation. It's not a no brainer to just say, oh yeah, take the old thing and roll it here and take my old stuff and roll it over. You may or may not want to do that? 


depending on. Your tax situation. 


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So getting a picture of I've got four different 401ks and a couple of IRAs, and then I've got my spouse or partner has a couple of things. Building that picture first, put it all together, add it all up, see where you stand. Then you can start making some pragmatic choices about how to simplify or consolidate or move things so that you are in a better financial position than when you started. 


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I'm pretty sure he meant constellation. And I don't think constellation food as a thing and whatever Tom Brady is the greatest quarterback of all time. He's not a road scholar. All right. You said there are two things you do at the beginning of the year. One of them is getting a sense of net worth and then you get into some savings goal setting. 


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They didn't have much yet, but I could just really see in even three months in six months, how this was going to start growing for them. And so it gives you that confidence that, oh yeah, I'm saying, everybody knows in your saving account, you're getting nothing right now, no interest or anything, but that doesn't mean not to save. 


So it's a really great metric for watching that. Now you lose the nuance, we're boiling everything down to a single number. So you lose the nuance of where things are. But the flip side is it's easy to understand it's one number. And when you go to say, buy a house, you're saving for the down payment and then you go use that money and buy the house that net worth doesn't change. 


Okay. That's, what's great about it. It's not, you'll suddenly see our account values go way down, but then you own a house on the other side. So that's why, again, I like the net worth and tracking it over time to watch your progress and see if there's any ways of boost. Results by, like you said, looking at different accounts or even the liabilities on the, how many debts you have, how, what the interest rates are. 


You're reviewing that once a year. So it's a really great building awareness and tracking over. 


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goals. So assuming you already know where you're going, whether that's retirement or saving for kids' education or for that vacation, next year, whatever your goals are in the near term and long term. 


You set those targets and then we want to save towards them if there's money that we want to spend in the future. And so I like to have that laid out here at the start of the year. Okay. I'm going to save 6,000 into my Roth IRA. I'm going to save 10,000 into my 401k. Broke a 401k account. That could be a plan for the year. 


It could be a maxing out, my IRA, my 401k. And then I also want to save towards vacation just in my savings account for that Christmas vacation, this year. So whatever your goals are, I like setting that here in January. What are we saving? Where are we saving it? So we set the expectation right away, and then we can start automating those sales. 


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So I want to spend, I want to save $200 a month so that I can support organizations I believe in. Or we're taking a big family vacation next year. I think it's going to be $6,000. I want to save, 400 a month, to reach that goal, whatever it is, setting it up front, because the way I do budgeting, Matt, it flows from this too, is that I want you to spend everything that's left over. 


I don't want you to track a budget and try to manage, how much we're going out to eat and things like that. What I'd like you to do is say I'm saving towards these. Automate all the savings and everything left in your checking account, you can spend. 


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If you have long-term goals and you're hitting your targets there, then you don't need to worry about that side. And look, if you don't spend everything and you have extra. Okay. That's something else you can do with your money. It's great. Or you can give it to charity or whatever, but it, it does seem a simpler way to do it. 


How long does this process take? Is this like a major enterprise that we're talking about over the next few weeks? Or are you able to bang this out in about an hour with your clients? 


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If you're with a partner, say yes, we're going to save the max in our 401ks. We're gonna. Some Roth IRA's, we're gonna do our 5 29 plans. We're gonna, whatever it is, write it down together, agree and save it right off the top and then automate as much as possible. It's not a very lengthy process, but like you to commit towards the savings first, because if you save first, then whatever's left. 


You can decide how it is. You want to spend it, Hey, I want to buy this new thing or I want to go out to eat. We'll look, I've got money left over at the end of the month. We can go ahead and do that, and it will help you prioritize. That money instead of worrying all the time, are we saving enough? 


Do we need, can we go out tonight? I don't know. You've already saved right off the top. So it gives you that confidence about using being flexible with the rest of your money. 


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Hey, maybe it's just a retirement, like I just want to be saving towards retirement. Okay. So what accounts do you have access to? Does, do you have an employer account, 401k or 4 0 3 B. Do you have a, an IRA? Have you already opened one up or can you use one? Do you have an HSA now? You can listen back. 


The Powercast I did last week had this account funding. So you can listen to that episode And go through where you should save dollars, in a waterfall method. But first it's just, how much am I going to save this year? Here's my salary. Here's what I want to put away. Where are you going to put it away? 


Write it down. I'm going to put away this amount. So how much is that per month? And then can you automate any of it? Can you go into the website? You don't automate it. So all of that won't take very long, but the critical piece to me is just thinking of. Just making sure it fits with how you want to live this year. 


That's the whole point about planning. This is what I want to do this year. This is what I'll commit to. And the nice thing about this one, it's not like I'm asking you to commit to hitting the gym three times a week. All I'm asking you is what do you want to save? Go on the website, automate that $200 a month, click it over to another account. 


And there you go. You're set for like the whole year. And so you can feel great about that. 


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What would that thing be? And is that still beneficial? You make sure that you have maxed out the, your contributions to your 401k. I assume that's a good thing. 


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Thanks for joining us on financial planning for entrepreneurs. If you like, what you heard, please subscribe to and rate the podcast on Apple iTunes, Google play Spotify, or wherever you get your podcasts. You can connect with me on linkedin or mortonfinancialadvice.com. I'd love to get your feedback. If you have a comment or question, please email me at financialplanningpod@gmail.com. Until next time thanks for tuning in

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