By Chalmers Brown, CTO of Due
From a bonkers real estate market to COVID shutdowns to a possible recession, it seems like getting ahead financially is harder than ever.
Maybe you’re just looking to save a few hundred dollars each month. Alternatively, maybe you want to build a solid plan to accumulate and grow real wealth for the future.
Whatever your financial goals, the uncertainty in the global economy heading into next year shouldn’t stop your progress. As 2023 approaches, here are some things to keep in mind about the health of your finances.
1. Diversify your assets
When you think about retirement and wealth building, your mind may automatically turn to real estate. The advantage of entering the housing market early is that you can usually expect your return on investment to double about 20-30 years later.
Buying low and selling high or flipping houses are fine for shorter term investments. However, if you’re willing to play the long game, buying what you can afford and renting is a safer bet for retirement.
The more creative you are to make your business as efficient as possible, the more money you will keep in your pocket.
For example, if you are a new landlord, one of your biggest financial risks is choosing the wrong tenants. You can help manage this risk by checking the employment history of your tenants.
Other standard options for diversifying assets include stocks and bonds. Annuities are another popular method with older generations. After all, the gray-haired man on TV who shouted, “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 great things to include in your portfolio, more and more investors are thinking outside the box. All sorts of alternative investments can supplement your portfolio and reduce risk in the event of a stock market crash. And the best part is that modern technology makes it easier than ever to find and buy these assets online.
Cryptocurrency and blockchain technology have made certain assets more accessible to investors. In the past, huge and extremely expensive commercial real estate was ridiculously off-limits to all but the privileged and wealthy few.
With blockchain technology, however, transparent ledgers and segmented real estate can open up the possibility of buying real estate shares easily.
The downside to venturing into investment territory outside of typical stocks and bonds is that additional due diligence is often required. You need to make sure you fully understand what you are investing in and the risks involved. This brings us to the subject of outside assistance.
2. Get expert help
Solid wealth building tactics are not universal.
Your situation is likely very different from that of a shipping tycoon or a third-generation farmer with vast acreage assets. To add to the nebulous puzzle of financial planning, government rules and regulations change regularly.
You may want to consult with experts to properly relate your situation to the best financial planning strategy. When choosing experts, make sure they ask detailed questions about your goals and situation before advising you on a course of action.
Mary Lyons, the founder of Wealth Woman, describes a typical situation between financial advisers selling a product and those designing a strategy.
Basically, a client can request a thorough portfolio review to initiate significant changes as advised. An effective advisor will assess the client’s goals and situation and create a comprehensive strategy for current and future resources. An advisor who only sells a “product” uses the same basic wealth building methods that he applies to every client.
So before entrusting your portfolio — and your future wealth — to an advisor, ask yourself 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 variation in advice between clients, your strategy may not be suited specifically for you.
Alternatively, you can follow sites that focus on a specific audience for more targeted advice relevant to you directly.
For example, if you are a veteran and are hoping for financial assistance tailored to your needs, you can visit a site such as Veteran.com. Here you are more likely to find information about Tricare and other military benefits. A general financial site is unlikely to address these issues in an easy to navigate way. By finding niche sites, you will often be able to learn more about the situations and tips that best apply to your life.
3. Know your weaknesses
Saving money can take different forms. Generally, though, setting boundaries with yourself is a good place to start. To create these boundaries, you must first be honest with yourself and know where you are vulnerable to temptation in your spending habits.
Sometimes it’s as simple as tracking your spending and seeing where things get out of hand. Once these decisions are made, you can set a monthly or annual budget. Having this spending limit and this concrete threshold can have an influence on the exercise of self-control.
If you still find yourself consistently going over budget, it might be time to put some more substantial limits in place.
For example, many people struggle to own a credit card and get trapped in a cycle of high balances and interest charges. If this sounds familiar, you can contact your credit card company and lower your credit limit to cut yourself off.
Alternatively, you can avoid credit cards altogether. You’ll probably need some sort of electronic payment option, as check and cash payments are becoming more and more 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 think of their bank balance as their only “real money”. Make sure to choose the one that suits your needs.
Make 2023 your year
It’s never too late to review your long-term wealth-building strategy and its evolution. And for those who want to cut back on expenses or start investing, it’s never too early to start. So make 2023 the year you build confidence in your financial endeavors by making good choices for long-term success.
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