Ready. Set. Go. The New Year is approaching fast, and it’s time for investors to map out a course for success. 2021 was another banner year for stocks as the S&P 500 soared more than 25 percent despite political unrest, the Omicron Variant, escalating inflation, and rising interest rates. The market also incurred several declines of 4 percent or more, but your accounts probably performed well if you remained invested.

As we approach 2022, it’s time to review and adjust your financial plan and investment holdings. To help you succeed, here are some ideas you can incorporate.

• Rebalance. If you entered 2021 with an allocation of 60% stocks and 40% bonds, it is now 67% stocks and 33% bonds – more aggressive than your original profile. Rebalance your portfolio back to its initial allocation to mitigate your risk.
• Budget. January is an ideal time to review last year’s spending. Are there areas in your budget where you can reduce spending? Can you increase savings? A well-structured budget gives you the freedom to spend with confidence. You can control your spending and savings – two critical components for creating wealth.
• Plan. Is 2022 the year to build your financial plan? A financial plan will guide your financial future by quantifying your hopes, dreams, and fears. It will also align your goals with your investments to boost your planning.
• Give. If you own a home and stocks, your wealth likely jumped substantially in 2021. Unfortunately, those who didn’t own assets were left behind. To help those in need, consider a philanthropic strategy. In addition to doing a good deed, It could reduce your taxable income. A donor-advised fund and charitable remainder trust are two popular giving vehicles.
• Increase. The 401(k) contribution jumps to $20,500 next year. An easy way to invest and build wealth is through your company retirement plan. In addition to the regular contribution, you can deposit another $6,500 to your account if you’re fifty or older. If you can’t maximize your contribution, aim for 10% of your income.
• Automate. Do you struggle with investing or saving money? If so, automate your investment contributions – set it, and forget it! If you’re unsure how much money you can save, start by automatically moving a certain amount to your savings account each month. If you don’t miss the money, keep it going. However, you can access your savings account without fees or penalties if you need money.

A new year is full of hope, and hope springs eternal. January allows you to build on your momentum or start over. Regardless of your starting point, spend time plotting your financial future. A few hours of planning today will pay huge dividends tomorrow.

Be at war with your vices, at peace with your neighbors, and let every new year find you a better person. ~ Benjamin Franklin

December 16, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. New Year’s Eve prediction: Baylor 28 – Ole Miss 17.