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As a financial advisor, there are 5 things I’m telling my clients to do to prepare for the new year

Tuesday January 26th, 2021
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As a financial advisor, there are 5 things I’m telling my clients to do to prepare for the new year

  • It’s been a challenging year, but there’s still time to strengthen your financial situation heading into 2021.
  • In conversations with clients, I’m advising them to review household budgets, set goals for the near- and long-term, and keep investing.
  • Also, if you’re in the position to do so, consider ways to take advantage of low interest rates, like paying off student loans.

This year has been financially disruptive for nearly everyone. And while the stock market has recovered after a rollercoaster ride earlier in the year, there’s still plenty of uncertainty about stocks, the pandemic, and the economy going into 2021.

No one can predict the future, but if you’re still worried about yours, you can take steps today to strengthen your financial picture, setting you up to thrive in 2021 and beyond.

Based on conversations I’m having with my clients, here are some actions I’m recommending.

1. Revisit your household budget

The economic fallout from the pandemic has impacted most families’ balance sheets in both large and small ways. For some, it’s a changing income picture due to job cuts or reduced employment, for others it’s a different expense picture from the addition or loss of childcare, less or non-existent commuting, or delayed vacations.

By taking a fresh look at necessary versus discretionary expenses you can free up extra income. Think about expenses related to travel, daycare or babysitting, or eating breakfast or lunch out every day.

2. Set realistic goals – and keep them

You’re unlikely to get to your preferred financial destination without a plan you can stick to. Be realistic. I am currently working with clients about goals over three time periods: year-end, next year, and longer – say, five years.

We look at the client’s current financial situation and determine what needs to happen to achieve those goals, and make adjustments where necessary.

3. Keep investing

Remember that market-shaking events like recessions are part of life. I started my career shortly before the Great Recession and subsequent market crash. When clients asked me then how they should adjust, my answer was always the same: Stay focused on your financial goals, especially if you’re investing for the long term.

Stocks can be volatile in the short term, but in the past the market has always recovered from declines, even if that recovery took some time. There’s no reason to think this time will be any different.

4. Get rid of student-loan debt while interest rates are low

One significant cost burden that is particularly prevalent among millennials is student loans. The Cares Act left interest rates on many of these loans at 0%, and the US Treasury department has extended that period until Dec. 31, 2020. If you are saving money in other areas, it’s an excellent time to eliminate or reduce this or other debt on your balance sheet.

5. Keep looking for opportunities

The market correction of 2008, devastating though it seemed at the time, was in retrospect a great time to invest. With interest rates likely to remain low for a long time, consider moving faster on certain big purchases – like a house that you may have been putting off.

Even in troubled times, there are always opportunities. Taking these steps now can set you up to thrive next year, and in the years to come.

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