New year, new you. Right? If one of your resolutions is to get a better grasp on your finances, Chris Abts, President and Founder of Cornerstone Retirement tells 2 News it does not matter if you are just starting to invest, or have been investing for decades, the new year will bring new opportunities.
It can start with a budget.
“Are you aligning with how you spend money with what is important to you?” asks Abts.
He knows that creating a budget can be daunting and intimidating
“I think most believe that a budget can be controlling or restrictive,” said Abts. “I believe if you have a budget, it’s not that you have to watch all of your finances, it’s just that you have an understanding of where your money goes.”
So this year, he challenges people to track their expenses for the first 90 days of 2022. After, evaluate where that money went.
“At the end, take a look and say ‘where did I spend my money?' Look at that,” said Abts. “Then you get to decide if your values align with that. You might be surprised where some of that money went.”
In that budget, prioritize retirement and keep housing costs to no more than 25%-- that means your rent, or a mortgage. Anything above a third of your monthly income is high.
“That is way too much. That is not where you want to be.”
Another New Year’s Resolution is to manage your debt and knowing the difference between good and bad debt in 2022 is critical to put yourself in the best financial position.
“There is good debt and there is bad debt,” he said. “Credit card debt is bad debt. School debt, I would say that within reason, that is good debt. Understand the debt you have.”
For a person who is already invested in the stock market, Abts thinks a person needs to realize where the economy is today to consider where it could go. With high inflation rates, speculation of higher interest rates, and supply chain issues, 2022 could get interesting.
“There is a time to make money, and there is a time to not lose money,” he said.
Some experts say that because the stock market has risen 18% per year for five years means the market is due for some type of correction. Abts says knowing the risk exposure of a portfolio is also imperative for the new year.
“Understand how much risk you are taking and make sure that is in line with your risk tolerance,” he said. “Know what you own and know why you own it.”
