Welcome to December! This year has been quite a ride. In our family, we celebrated graduations, a wedding and a new grandchild. Those were the highlights. On the other side of the ledger, we had a very challenging year with the market and experienced all the other stress the world has so freely offered us all.
I have found it doesn’t take a lot of disappointment or stress before it becomes difficult to find joy in a hard year. Historians say that the victors write history. So, if you have survived this year, you now have the right to choose what your highlights of last year were. I’m choosing to remember the better parts.
But December isn’t just about looking back – it’s also about preparing to move forward. In December of last year, the world and the economy looked very different than it does now:
- There wasn’t a war in Europe
- Inflation had just started its spike from 1.4% to 7.0% (according to BLS data)
- Mortgage rates were around 3%
- The stock market had not yet corrected
We know the cost of what we normally do has gone up. But do you know how much? Most of us are accustomed to making small adjustments to small changes. We do it naturally and without much planning or consequence. But when things change as fast as they have this last year, we sometimes can’t adjust quickly enough.
This might be a good time to look back and see how your cash flow fared for the year. Many of our clients have reported an increase in monthly expenditures of between $300 - $600 per month. For some, these changes are causing some real challenges. Credit card balances jumped 15% in the third quarter of 2022, notching the largest year-over-year increase in more than 20 years, according to CNBC.
Just as we get to choose how to remember this year, we can also choose how to adjust our financial priorities as the conditions around us change. One of the core concepts of financial planning is knowing your current financial location. Finding it is as simple as knowing how much you make and where it all goes. I recommend looking back over the last 3 months of transactions to see how inflation is impacting your spending.
Once you know how things have changed – and whether these changes are causing financial stress – you can make decision about how to spend based on the things you value most. Using a Values First approach is a great way to get the most out of your budget.
It is our hope that before we all race off into the unknown of 2023, you will be able to slow down and honestly reflect on this last year. Celebrate the good, acknowledge the challenges and be ready to move forward with courage, confidence, and faith. If you need any help looking back or looking forward, let us help.
Merry Christmas from all of us at Values First Planning!