Three Reasons Why January is a Great Month for Money
January can be a really rough month for a lot of folks. Up here in the snow belt, there’s a certain greyness that befalls everything after the holiday season and lingers until sometime in March or April. There’s at least one really great thing about January, and it’s that January is an exceptional month for money. Here are three reasons why that’s true with some tips to leverage your time inside.
A calendar year of expenses in your hands
This is probably the biggest reason why January is a great month for money. While technically you always have data on 12 months of expenses at your disposal with which you can do a spending analysis (you can look at your statements or your transactions at any time), there’s something in our brains that loves things being complete. Looking at your expenses from October 1, 2021 to September 30, 2022 just doesn’t hit the same way that analyzing expenses from January 1, 2022 through December 31, 2022 does.
And yes, I just talked about expenses “hitting” like they’re a cold drink on a hot Summer day.
Recommended action: Pull your checking account statements for all of 2022 and tally up what you spent. Better yet, find a way to download your checking account transactions over the past year into a spreadsheet and total up those expenses. Compare what you spent to your net income. How did you do? If you want some help with this, reach out to me and we can work on it together.
Performance from the previous year
You don’t need to be an investment manager to catch on to the fact that last year was a rough year for investments, and your year-end statement from your investment accounts (which come out in January) may show you that. While losing money in our investments is painful, years like 2022 are an important litmus test for our risk tolerance.
Risk tolerance is one of the key factors that financial advisors like us here at Generation Capital Management use to determine how your accounts should be invested. A higher risk tolerance often means that you are willing to trade more volatility in your portfolio for the potential of greater returns. A lower risk tolerance means that you’d rather not experience the extreme ups and downs of the markets even if it means a potentially lower overall return on your investments when markets are up.
Recommended action: Take a look at your December or Q4 2022 investment statement(s) and be careful to observe how it makes you feel. Did it turn your stomach and make you feel like you needed to make a change? If so, your risk tolerance might not be as high as you thought, and you might need to revisit your investments with the help of a professional. If you’re in this boat, you can reach out to us here at Generation Capital Management and we will help you review your investments.
Fresh start with a built-in paradigm shift
January is the best month for money because we are most likely to make changes when we have a paradigm shift. This month is our built-in annual “fresh start”. In fact, the new year’s resolution is based on this principle.
People often lose momentum with their resolutions because they don’t make them habits. Not because they don’t want to, but because they try to make too much change in a short amount of time. Changes should be deliberate, small, and achievable to increase their likelihood of sticking. This applies to any change that you want to make in your life, including tightening up your finances.
Recommended action: Take everything one day at a time. Small objectives that can be completed today will help you create healthy financial habits. Think about what you want to change in your financial life as an overall concept. Something broad like “stay on top of my finances” or “save more money” are great examples.
Then break those goals down into daily actions. If your high-level goal is to stay on top of your finances, be sure to check your bank account balance every day. Extend that into setting quarterly reminders in your calendar to do a deep dive on your expenses, credit score, and credit report.
If you want to save more money, think about your daily actions that cause you not to save more money. Instead of buying a candy bar (please, I’m so guilty of that), log into your bank accounts and transfer $2 from checking to savings.
I always say that financial health is just like physical health. No one goes to the gym on Monday and reasonably expects to be at their goal weight on Tuesday. Wellness is a process of sound choices made on a daily basis over a body of time.
So, that’s it! January is a great month for money but only if you take action. These items are low-hanging fruit that can really set you up for success in the long run. And, as always, I’m just an email away if you want some more in-depth help getting your financial house in order. Feel free to reach out to me at jhowe@gencapmgmt.com and we can set up a time to talk about your goals!
John Howe-Wemett, CFP®, M.S.
