As part of your self-care routine, consider creating the habit of a monthly RECAP. RECAP, as an acronym to apply to your financial situation, means evaluating your retirement accounts, emergency fund, cash flow, assets, and plans for your finances.

Retirement accounts: have you maximized your contributions this year? Are you currently employed by a corporation? If so, do you have access to a 401(k)? Are you contributing to it? Some corporations offer a match to employee contributions. Have you been contributing to your 401(k) up to the match amount of the corporation? Increase your contribution amount before the end of the year to take advantage of the match amount and potentially reduce your taxable income.

Are you self-employed? Did you know that contributing to a retirement plan, whether a traditional IRA, or SEP IRA, may reduce your taxable income? Take advantage of this opportunity to increase your retirement savings and save money on your taxes. You have until April 15, 2023, to make your 2022 contribution. Talk with your CERTIFIED FINANCIAL PLANNER™ and local tax professional for guidance on your situation.

Yes, 2022 has been a challenging year for the market, and you may feel disappointed that your retirement account balance has been struggling despite your contributions. Nevertheless, if you have more than ten years before retirement, when you contribute to your retirement plan and invest that money into mutual funds or stocks, you are accumulating shares. Thus, regardless of your balance, you are still growing your retirement account. (Google the term dollar cost averaging to learn more about why this practice of buying shares consistently, regardless of market performance, is important.)

Emergency fund: is yours funded? Ideally, if you are single, your savings account  should have enough money to cover six months of living expenses and, if you are married, your savings account  should have enough money to cover three months of living expenses. 

Why the difference in amounts? The thinking goes that when you are  a two-income household, it is unlikely  both people will be unemployed at the same time and, if that is the case, one of the two is likely to earn gainful employment within three months. 

Financial planning textbooks state that your emergency fund should be available as ready cash in a savings account. But is that a realistic expectation in the real world? Not for everyone. In some cases, people may be short on cash but have access to lines of credit via their credit cards.     In some cases, for  people who use credit responsibly, it may be appropriate to include a percentage of that available credit line as an emergency fund resource. 

For many, this is a controversial topic. There are some famous financial coaches who tout that having credit is a bad thing. However, I believe that comes from an experience of knowing people who have a habit of spending beyond their means and using credit irresponsibly.

During my career in finance, I have encountered situations demonstrating how every person’s situation is different and there is no one right way of approaching a solution. I am a proponent of using credit responsibly and I know this to be true: credit is easy to come by when you don’t need it and hard to come by when you do. 

Cash flow: do you know how much cash is coming into and going out of your household each month? This can be tracked easily through online banking or mobile app available through your credit union or bank. 

For example, through Champion Credit Union’s online banking portal, members have access to a Money Manager tab (at the top of the webpage) which you can use to track your budget, cashflow, goals, and net worth. Through Wells Fargo’s online banking portal, customers have access to My Spending Report with Budget Watch which shows you how much money came in, went out, and what is left. 

Explore the services that are available to you through your financial institution and ask yourself whether your money is going toward your goals and your vision  for the future. Write out your answer. If you are on track for achieving your financial goals with the way you are currently managing your finances, bravo! Keep up the good work and think about new goals for 2023. If you are off track, be kind to yourself. Write out why you are off track: did an event happen during the year that derailed your financial plans? Describe your experience and how you survived it. Then, describe how you can set yourself up for success in 2023.

Assets: what new assets have you acquired during 2022? Did you buy or sell a home? Did you pay off debt and increase your net worth? Did you invest in your retirement plan? What are your assets going into 2023?

Finally, what is your 2023 plan for your finances? How will you set yourself up for success in 2023? 

RECAP 2022 with a spirit of kindness and grace, especially as it relates to your financial situation. Remember: every person’s situation is different and there is no right way to approach a solution. Sometimes the best solution may be the one that helps you to survive an unexpected life event. Whatever form that solution takes, know that you are capable of surviving and thriving whatever life throws your way. You will find the resources and you will take the steps to care for yourself and those who depend on you.

Here's to a new year!

Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC, where she offers financial planning and investment management services for either a one-time or on-going cost. For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com.