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Monday Money Report

| January 08, 2024

The markets started off the year on a down note, with the S&P 500 down about 1.5%. Much of the decline was driven by some of the big tech stocks that had fueled market gains for most of 2023. It remains to be seen if this is just investors taking gains off the table, or a hint of future declines. Companies begin reporting quarterly earnings this week, which may provide insight into the rest of the year.

With the start of a new year, it’s a great time to take stock of your finances. If you haven’t already done so, prepare a balance sheet.  This is just a list of your assets, or what you own, and your liabilities, or what you owe. The difference between the two is your net worth.

After that, take all those year-end reports from your bank and credit cards to see how you’re spending your money.  An overall budget for the year can be a great exercise as well. Start by listing your take home pay, multiplied by the number of paychecks you receive each year. Then list your fixed expenses, such as rent or mortgage payments, insurance, and phone payments. Next are your variable expenses, such as electricity, gas, and groceries. What’s left over is your available discretionary income.

Look at each line item to see where you can find savings. Can you stop a streaming or subscription service? Spend time planning your meals for the week to reduce your grocery bill? Shop for lower rates for home and auto insurance?

If you have a specific goal in mind, add that to your fixed expenses.  Whether the goal is building emergency savings or taking an amazing vacation, that should become a bill.  If you set aside the money automatically, it will lower your discretionary income. Many of us spend whatever is in our checking account without worry, but then there’s nothing left to save for other goals.  Save first, and spend whatever’s left.

Your final step is looking at any debt you have, outside of your mortgage.  Are there loans that could be consolidated or refinanced? Do you need to focus on paying off credit card debt? Calculate the amount you are spending on interest annually, and work to reduce that number to zero.

Your action item this week is to adjust your savings.  IRA and 401(k) limits have increased, so consider increasing your contributions, especially if you’ve received a raise to start the year.

CovingtonAlsina is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.