By Chalmers Brown, CTO of Due
From a bonkers housing market to COVID shutdowns to a possible recession, it seems like getting ahead financially is more challenging than ever.
Maybe you’re just looking to save a couple of hundred bucks every month. Alternatively, perhaps you want to construct a solid plan for accumulating and growing real wealth for the future.
Whatever your financial goals may be, the uncertainty of worldwide economics heading into the next year shouldn’t stop your progress. Heading into 2023, here are some things to keep in mind regarding the health of your finances.
1. Diversify Your Assets
When you think about retirement and wealth-building, your mind might automatically go to real estate. The advantage of getting into the housing market early is that you can generally predict doubling your ROI approximately 20-30 years later.
Buying low and selling high or flipping houses are all well and good for more short-term investments. However, if you’re willing to play the long game, buying what you can afford and renting out is a safer bet for retirement.
The more creative you can be to make your business as efficient as possible, the more money you’ll keep in your pocket.
For example, if you’re a new landlord, one of your most significant financial risks is selecting the wrong tenants. You can help manage this risk by verifying your tenants' employment background.
Other standard options for diversifying assets include stocks and bonds. Annuities are another method that was popular with older generations. After all, the gray-haired man on TV who yelled, “It’s your money, use it when you need it!” sold them. Therefore, they must be an essential part of your retirement, right?
While stocks, bonds, and annuities are fine things to include in your portfolio, more investors are thinking outside the box. All sorts of alternative investments can round out your portfolio and lessen the risk should the stock market crash. And the best part is that modern technology is making it easier than ever to find and purchase these assets online.
Cryptocurrency and blockchain technology have made some assets more accessible to investors. In the past, large and extremely expensive commercial real estate was laughably off limits to all but a select, wealthy few.
With blockchain technology, however, transparent ledgers and segmented real estate can open up the possibility of easily purchasing shares of real estate.
The downside of venturing into investing territory outside of typical stocks and bonds is that additional due diligence is often required. You need to make sure you have a firm grasp on what you’re investing in and the risks involved. This brings us to the topic of outside help.
2. Get Expert Help
Solid wealth-building tactics aren’t one-size-fits-all.
Your circumstances are likely much different than those of a shipping magnate or a third-generation farmer with vast acreage assets. To add to the nebulous headache of financial planning, government rules and regulations change on a regular basis.
You might want to consult experts to connect your circumstances with the best financial planning strategy properly. When choosing experts, make sure they ask detailed questions about your goals and situation before advising a course of action.
Mary Lyons, the founder of Wealth Woman, describes a typical situation between financial advisors who sell a product versus those who devise a strategy.
Basically, a client may seek an in-depth review of their portfolio to initiate significant changes as advised. An effective advisor will assess the client’s goals and circumstances and create a comprehensive strategy for current and future resources. An advisor who just sells a “product” has the same basic wealth-building methods they apply to every client.
So before handing over your portfolio — and your future wealth — to an advisor, ask a few questions. Ask what strategies they have devised for other clients and what the circumstances were in those cases. If there doesn’t seem to be much variance in advice between clients, your strategy may not be tailored specifically for you.
Alternatively, you can follow sites that focus on a specific audience to get more focused advice relating directly to you.
For example, if you are a veteran and are hoping for financial help tailored to you, you could visit a site such as Veteran.com. Here, you’re more likely to find information about Tricare and other military benefits. A general finance site is unlikely to address those issues in an easy-to-navigate way. By finding niche sites, you’ll often be able to learn more about the situations and tips that are most applicable to your life.
3. Know Your Weaknesses
Saving money can come in a variety of forms. As a general rule, however, setting boundaries with yourself is a great place to start. To create those boundaries, you must first be honest with yourself and where you’re vulnerable to temptation in your spending habits.
Sometimes it’s as simple as actually tracking your spending and seeing where things are getting out of hand. Once you make those determinations, you can set a monthly or annual budget for yourself. Having that spending limit and concrete cut-off point can be influential in exercising self-control.
If you still find yourself going over budget on a regular basis, it might be time to put some more substantial limitations in place.
For example, many people struggle with credit card ownership and find themselves trapped in a cycle of high balances and interest fees. If this sounds familiar, you can contact your credit card company and lower your credit limit to cut yourself off.
Alternatively, you can eschew credit cards altogether. You will likely need an electronic payment option of some sort, as check and cash payments are becoming increasingly inconvenient. But if you know a credit card in your wallet is a temptation you don’t need, consider using a debit card instead. Some people view their bank balance as their only “real money.” Make sure you pick the right one for your needs.
Make 2023 Your Year
It’s never too late to take a second look at your long-term wealth-building strategy and how it’s panning out. And for those wanting to cut spending or begin investing, it’s never too early to start. So make 2023 the year you build confidence in your finance efforts by making good choices for long-term success.
