Our Financial Planning Feature on Jenni Kayne - Rip & Tan

This week’s blog post features a highlight from our recent conversation with the folks at Jenni Kayne’s Rip & Tan blog. You can check out the full article here. We offered some basic financial guidance for 2021, including three key pieces of advice, to help you set intentions as you reflect on 2020 and plan for the year ahead. Read on for our thoughts...

1. The realities of Covid-19 pushed a lot of our financial goals by the wayside. What can we do to get back on track and set ourselves up for financial success as we enter the new year?

We see a lot of people’s finances, so we understand intimately that last year was merciless in some ways -- job loss and financial insecurity upending our routines and lifestyles. 2020, however, didn’t play out for everyone that way. Some Americans had a hugely positive year when it came to their finances - savings rates are higher than normal and as a result household net worths increased. We have some clients who bought houses and others who saw their companies going public - these are huge financial wins to be celebrated. No matter where you are currently on this spectrum, we want you to know that your goals are unique to you and it’s still possible to achieve them, even amidst a global financial crisis.  

It’s hard to separate the emotions from the reality, but we often remind our clients about the reality of the markets, which don’t mirror the economy. For example, if you had invested in the U.S. stock market (as measured by the S&P 500) at the beginning of 2020 and stayed invested through the year end, you would have earned roughly 16% on your money.  That’s despite negative growth in the economy. Obviously no one could have predicted how the markets reacted to Covid-19, but it should give us more confidence. 

Speaking of confidence, our core mission is to increase the financial confidence of our clients, especially women. We meet so many people - both men and women - who haven’t invested because they lack confidence. When people lack confidence in investing, they sit on the sidelines - which means that they choose to stay in the safety of a checking or savings account (which today on average is paying interest of 0.05% annually) rather than take the risks they know little about. 

One way to increase your investing confidence in 2021 is to set an intention to learn a bit more about investing regularly. If you’re an online learner, you can subscribe to an online newsletter like The Morning Brew that delivers daily financial news to you in a super digestible format. You can listen to podcasts. We recommend anything created by Marketplace. If you’d rather turn the physical pages of a book, you can set an intention to read a book about money or investing every month (or two). We’d recommend starting with our new favorite book on money and investing, The Psychology of Money: Timeless lessons on wealth, greed and happiness, which was just released last year. When it comes to investing, even a little bit of knowledge can boost your confidence. 

2. Are there any financial tasks we should check off our lists in the beginning days of 2021?

Before you get back into the swing of daily life, we definitely think it’s worth it to do a financial check up. 

Start with a review of your goals. What are you saving for? Most of us get on autopilot after January and don’t regularly check in on what’s important to us and how we’re progressing towards those goals. Given the amount of surprises and re-directions that happened to most of us in 2020, the beginning of this year is a perfect time to check back in. 

Once you have your goals in mind, review your Mindful Spending Plan and make adjustments for the new year. How much of your take home pay do you want to dedicate to essential expenses, savings and joyful spending? Is your monthly saving amount sufficient to help you hit your goals?

Next you’ll want to review and adjust your savings and investment contributions so they can help you meet your financial goals. Planning and prioritization of your goals is essential to a successful financial life:

• If one of your goals is to replenish your emergency fund in the new year, we’d recommend targeting three months of expenses (both essential and joyful) saved in a high yield savings account. If you have a family, we’d recommend keeping six months of expenses saved.

• If you want to max out your retirement contributions in 2021 in a 401k plan, (which we highly recommend!), you’ll need to set aside $1,625 each month.

Finally, think about the year ahead and brainstorm ways in which you (and your family) can save more money. A couple of easy ways to start: 

• Review your insurance policies. Are you still working from home indefinitely? Making sure the estimated mileage on your auto insurance policy reflects your WFH status can save you hundreds of dollars over a year. If you pay for your own health insurance, make sure you update your estimated income for the year - if your income went down, your healthcare premiums will likely be reduced.

• Do an evaluation of all of your credit cards. Are you being charged annual fees? If you use a card regularly and like the perks, then a fee is ok; if you don’t use a card and are being charged a fee, it’s better to close it. Pick credit cards that align with your goals.  

3. Any financial resolutions we should aim to make?

At Mana, we’re all about setting financial intentions. Unlike resolutions, intentions involve the act of you thinking more deeply about what you want your life to look like in the future and making this a regular practice in your life. Countless studies have proven that after writing out your intentions and saying them out loud, you’ve begun the process of living into a future reality where your intentions have become your reality. We encourage all of our clients to set financial intentions at the beginning of each year because, without knowing where you want to go, it’s impossible to celebrate how far you’ve come. 

Financial intentions can encompass a whole range of topics, but here are a few examples of the financial intentions we make for ourselves each year:

• Defining your ‘enough’ in 2021. 

• Being realistic and kind to yourself always, especially when it comes to money. Even being aware that you’re in debt is the first step to progress and should be acknowledged as progress in and of itself. 

• Being open about finances. Tell your partner your goals and work together on joint goals. Accountability isn’t done in secret. Don’t let the guilt or fear make you hide your goals -- friends, family members, and partners can all be allies for helping you stay on track. 

• Save with a purpose. You may not have the cash on hand to buy a house in LA tomorrow, but you can have it sooner than you think if you prioritize it over spending it on things that aren’t as important to you. 

• Increase your net worth in 2021. Your net worth is a really simple, easy way to track your wealth over time. To calculate your net worth, you sum up all that you own (your assets) and subtract it by all that you owe (your liabilities) - the difference is your net worth. You can increase your net worth by saving more, paying down debt, and growing your investment assets. Ideally, it’s a combination of all three.

We hope this post reminds our readers that holistic financial planning is crucial to building and defining personal wealth. At Mana, we know that small changes and consistent habits make a big impact on your wellbeing. No matter what your own dreams entail, make sure you’re setting the right intentions and following a clear path to achieve them. And as always, we encourage you to work with a Certified Financial Planner® to help explore your life vision and realize those big goals.

Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.