What is the October Theory?
Editorial staff, J.P. Morgan Wealth Management
October doesn’t just bring cooler temperatures and color-changing leaves – it’s the month that ushers in the end of the year, with summer over and the holiday season fast approaching.
It can also feel like a natural time of transition, and for some, a time to consider making a fresh start. In recent years, the reflective nature of the last quarter of the year has inspired the “October Theory.”
What is the October Theory?
The October Theory is a motivational trend that’s grown popular in recent years on social media. It involves reframing the last three months of the year as a time to reflect, set goals and build better habits, with the aim of achieving positive change before the year ends.
You can think of it like an early New Year’s Eve, or a time to reset and make resolutions for the months ahead. According to Google Trends data, searches for “October Theory” first surged in the fall of 2023, with interest in the term more than doubling the following October. But even though the trend is relatively new, you may find it a useful framework for achieving your personal and financial goals.
Significance of the last quarter of the year for financial planning
The last quarter of the year can be an important time for year-end planning, including reviewing retirement contributions and evaluating saving and spending habits.
Not only is it the last chance to make contributions to employer-sponsored 401(k) plans, it’s also a good opportunity to plan for any additional contributions to a traditional or Roth IRA before the April 15 tax deadline. Similarly, it can be a good time to assess your investment portfolio and rebalance your holdings to maintain your desired asset allocation and risk tolerance.
Taking this time to review your finances can help you identify opportunities for personal financial growth and any goals you’d like to work toward.
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How to use the October Theory to improve your finances
Putting the October Theory into practice starts with defining your financial goals for the last quarter. When setting goals, it can be helpful to use the SMART method, which stands for creating goals that are specific, measurable, achievable, relevant and time-bound.
- Specific: Clearly define what you want to achieve.
- Measurable: Determine how you will track your progress and what will count as success.
- Achievable: Ensure the goal is challenging but still within reach.
- Relevant: Confirm that the goal aligns with your personal values and larger aspirations.
- Time-bound: Set a deadline for achieving the goal. It may help to set multiple deadlines for smaller milestones to ensure you stay on track.
To get the ball rolling, think about the financial SMART goals you’ve already set for this year. Which goals have you already accomplished? And for any goals you haven’t met yet, are you on track to meet them by the end of the year?
Taking this time to check in on your progress can help you to prioritize what you want to accomplish during the last quarter. For example, this can be a good opportunity to take stock of your debt and savings and assess whether you want to allocate more of your budget toward paying off debt or saving for the future.
You can also use this time to start thinking about your SMART goals for the following year, as there may be goals from this year that make sense to roll over to next year. Alternatively, you can use the last quarter to get a head start on new goals, so that you can enter the new year feeling more confident about what you can achieve. Think of it like establishing a consistent exercise routine before setting foot inside a gym on January 1.
When crystallizing your financial SMART goals – whether for the remainder of this year or for the beginning of next year – think about what the changes you’d like to make would look like in practice. Maybe there are old, unhelpful spending habits you’d like to correct, or new, more helpful budgeting habits that you want to implement. The last quarter of the year is a great time to start building the habits that you want to bring into the new year and beyond.
A financial checklist for the October Theory
Here are some examples of financial checklist items to consider when following the October Theory:
- Retirement planning: Do you have a concrete retirement plan, and if so, does it need to be revisited? Think about your retirement timeline, risk tolerance and current contribution percentage to retirement accounts. Can you contribute more before end of year to lower your taxable income?
- Investing: Is your portfolio still aligned with your financial goals? When making changes to your investment plan, a couple of things you may want to keep top of mind include tax strategy (e.g., ensuring you’ve accounted for any capital gains taxes in the current fiscal year) and diversification.
- Budgeting: When was the last time you went over your budget? It may be time to look at your income versus expenses to see if there are areas that could be tightened – or loosened – to better fit your financial goals.
- Debt: If you have any outstanding debt, what’s your debt management plan? Would you prefer something like the snowball method (i.e., where you tackle the smallest debt first to build momentum) or the avalanche method (i.e., where you tackle the highest-interest debt first to save more in the long run)?
These checklist items can be turned into personalized goals using the SMART method to help you stay organized and follow through before the new year rolls around.
The bottom line
Setting and adjusting your financial goals doesn’t have to be a once-a-year exercise – using the last quarter of the year as a time to reflect and measure your progress can help you stay on track and motivated. A J.P. Morgan advisor can help you review your current financial situation and strategize the next steps toward achieving your financial goals.
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Editorial staff, J.P. Morgan Wealth Management
