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September: The Other January for Resolutions

Welcome back from summer vacation! In case you weren’t looking, the S&P 500 climbed 17.4% from its June 17 bottom through August 16, returning 17.7% with dividends. The recent market rise did not garner nearly as much media attention as its fall from January 3 to June 16, because the S&P 500 is still well below its January 3 peak.


While mid-summer looked promising, the uncertainty in the stock market and in the broader U.S. economy continues. This summer’s slowing inflation numbers made investors hopeful that the Federal Reserve would slow down future rate increases and potentially “pivot” to cutting rates in 2023, which lifted markets. However, Federal Reserve Chairman Jerome Powell’s August 26 speech reaffirmed the central bank’s commitment to raising rates into 2023.


In his speech, Powell said that inflation slowing over a one-month period from June to July “falls far short” of what the Fed “will need to see before we are confident inflation is moving down” to its 2% target. The Fed is clear that it needs more evidence before it slows or possibly pivots its rate hikes, but the stock market’s positive response to the first trace of inflation slowing is a hopeful sign of what is to come when the Fed’s work makes a more convincing difference. (See: Wall Street and Main Street: What is the Connection?)


And, in the meantime, we will once again remind our readers that market behavior over the past 8+ months is a normal and inevitable part of the bumpy road to the market’s long-term average. Going back to 1926, the U.S. stock market has rewarded long-term investors with an annualized return of about 10%, with returns in one year going as high as 54% and as low as 43% (on the extremes). And over that same time period, returns have been positive 71 times and negative 25 times.


So, please keep your seatbelts on as we continue down this bumpy road, guiding you (our goal-focused, financial plan-driven, long-term investors) through a retirement expected to last decades.


Fall Financial Refresh


And, just like the financial markets go through cycles, each year Charter Oak’s advisors notice a palpable sense of renewal among our clients in early September, right after Labor Day. Kids and grandkids go back to school and our lives return to routines that were set aside over the summer months. If you find yourself feeling similarly and want to check in on your family’s finances, we’ve broken it into seven simple steps below.


Step 1: Analyze Your Budget

Take a big picture look at your monthly and annual cash flow (your income minus expenses) to make sure your income outpaces your spending. Many credit cards and banks offer categorical spending breakdowns to help review your cash flow over the past six to 12 months, we also recommend tools such as Mint and Simplifi.


Step 2: Evaluate Coverage and Providers

While reviewing cash flow, evaluate your current providers and coverage options. This includes monthly subscriptions, internet, cable and wireless service providers in addition to your insurance coverage options. Review your autopayments to see what you are paying for, and whether you still need or want it.


Step 3: Prepare for 2022 Taxes

If you scramble to pull your paperwork together every March and April, try a different approach by getting organized early. Consider engaging your tax professional to create a mock tax return to help you understand withholding options and tax-saving opportunities before year-end (and before your tax professional is deep into tax season).


Step 4: Tackle Your Debt

While most people have some amount of good debt on their plate (mortgages, car payments, etc.), it’s the bad debt (credit card debt, student loans, etc.) that is best to focus on managing and eliminating. Consider creating a debt summary to track your total debt to make sure the amount is gradually decreasing.


Step 5: Review Your Retirement Savings

Whether retirement is decades down the line or within the upcoming year, reviewing your retirement savings on an annual basis is a great habit. Take the time to assess whether you can increase your contributions by a little or a lot (especially while the stock market is down).


Step 6: Revisit Short and Long-Term Goals

A lot can change in a year: marriage, death, divorce, birth of a child, a major career change. Even small adjustments like a job promotion or sending a child to college have a significant impact on your financial status. That’s why it’s important to regularly review your long-term goals and progress towards them, while also revisiting and evaluating your shorter-term goals.


Step 7: Revisit Your Estate Plan

Leaving your family with an outdated (or no) will, trust or powers of attorney can lead to major issues down the line. As you assess your estate plan, make sure you’re accounting for newly acquired assets (houses, cars, pets, etc.), checking that your beneficiaries are up-to-date, and your designees remain willing and able to step in if needed.


We hope the above is a helpful checklist to refocus on your finances this September. The advisors at Charter Oak continued to be grateful and humbled by the pleasure of serving our many clients. We wish you the best as summer winds down and the autumn leaves begin to fly.