In honor of Financial Literacy Month, we will be discussing a series of topics to help equip you with the tools needed to develop healthy financial habits, understand your financial position, and identify goals to work toward. Part Two will focus on helping you understand your net worth and using that to create long-term financial goals.

Why Net Worth Matters

Your finances are holistic and affect many aspects of your life. Your net worth is used in determining proper insurance coverage, creditworthiness, and as an overall barometer of your financial health. Understanding it can help you set long-term goals to maximize your financial freedom and minimize future financial worry.

2022 has been challenging for investors. Equities and bonds sold off, fears of prolonged inflation, rising interest rates, and the war in Ukraine have left investors feeling uncertain. The situation in Ukraine will likely have effects across the globe, with one of these effects being an increase in commodity prices due to sanctions against Russia. However, there has been some positive news. The world continues to open up, which has been good for businesses, supply chains, and investors. The U.S. Real GDP is still in line with its long-term growth rate, and the U.S. economy added even more jobs in March. The CPI rose to 7.9% YoY in March, the largest increase since the early 1980s. Even though inflation is still rising, it should start to slow as the Fed raises interest rates. The Fed raised the Fed Funds Rate by 25 basis points in March, the first-rate hike since 2018. Oil prices spiked in mid-March and then dropped at the end of the month. President Biden has also announced the potential release of 1 million barrels of oil per day from the U.S. Strategic Oil Reserve and is pressuring oil companies to lower prices for consumers.

During Financial Literacy Month we will be discussing a series of topics to help equip you with the tools needed to develop healthy financial habits, understand your financial position, and identify goals to work toward. In this first piece, you will learn how to develop your budgeting plan with a goals-based strategy.

Budgeting with a Goals-Based Strategy

A Goals-Based Strategy is a plan that starts with identifying future wants and needs (goals) and outlines the steps you should take to achieve them. The best goals are SMART: specific, measurable, attainable, relevant, and time-based. Building a budget is crucial to identifying realistic goals because of the light it sheds on your current financial habits. For example, you might discover you are already on pace to reach your goal without any changes or you might find out that there are too many non-negotiable expenses you would have to sacrifice to reach it. As you go through the process of refining your budget, you may discover some goals are of higher importance to you than others.