10 Money Resolutions for the New Year
Want to start the New Year the right way? Then choose a New Year’s Resolution worth keeping. Why not pick one that can make a real difference where it counts — in your bank account?
No need to be a hero here. Focusing on just one money resolution (instead of several) gives you the best chance of actually sticking to it, said John W. Eckel, CFP®, at Pinnacle Investment Management in Simsbury, Conn. “Limit yourself. You don’t want to get overwhelmed by trying to tackle too much.”
Where to start? Try these ideas, then repeat after us: “I resolve to…(insert your resolution here)”:
1. Get (or recommit to following) a financial plan. If you have big goals, like buying a home or retiring on your own terms, having a financial plan puts you in a much better position to attain them, according to Eckel. “If you don’t have a map to a destination, you’re probably not going to reach it.” So if you don’t have a financial plan — a roadmap for reaching your goals — enlist a CERTIFIED FINANCIAL PLANNER professional to create one for you. To find a personal finance expert near you, visit the Financial Planning Association’s national database at www.plannersearch.org. If you already have a plan, how about resolving to revisit the plan, then redoubling your commitment to following it?
2. Establish (or rededicate yourself to following) a household savings and spending plan. Having a firm grasp of what you take in and what you spend each month is key to controlling your own financial destiny. By implementing a household budget, you’re empowering yourself to be a wiser spender and saver.
3. Save (or save more) for retirement. The numbers are daunting: members of Generations X and Y likely will need a nest egg of $2 million to $3 million to live comfortably during retirement. Regardless of your generation, saving for retirement is a huge priority. It starts by committing to fund some kind of retirement plan, whether it’s an IRA, a workplace 401(k) or some other vehicle. If your employer offers one, take advantage of it; if not, ask a financial planner to help you set up an IRA. If you already have one, consider increasing your regular contributions. Even a modest increase today can make a major difference later.
4. Save (or save more) for a child’s education. With college tuition costs continuing to skyrocket, it’s never too early for parents (and grandparents) to create (or increase their funding of) a college savings plan, such as a tax-favored 529 plan. Consult a financial adviser to determine the best savings options for your family.
5. Establish (or add to) an emergency fund. Prepare yourself for life’s unexpected twists — job loss, a health crisis — with a savings account in which you set aside funds to cover the financial burden of unforeseen events.
6. Get insurance to better protect assets and loved ones. A relatively modest investment in an insurance policy can afford you and your loved ones much needed protection in the case of disability, death and other circumstances that can financially decimate a family. To determine whether life insurance, disability insurance, umbrella insurance, and/or other policies make sense for you, consult an insurance professional.
7. Rely less on credit cards in order to reduce debt. A high level of debt can wreak havoc on a person’s finances. To keep from falling into a debt hole you’ll have a tough time climbing out of, resist the temptation to use credit when you don’t have cash on hand, and take steps to chip away at the debt you already have.
8. Make (or update) beneficiary designations. You want the money you’ve put into assets such as life insurance policies, retirement accounts, and annuity contracts to land in the right hands when you die. The best way to ensure that is to revisit the beneficiary designations associated with those assets and update them as needed.
9. Talk to a tax advisor about ways to lessen the tax burden. One hour spent with an accountant or tax expert can yield significant savings on your tax tab.
10. Take stock of your investment portfolio. A diversified investment portfolio is a must for protecting your nest egg. These days, however, diversifying with stocks and bonds alone may not afford your portfolio enough protection. Your best bet is to talk with a financial professional about other options, such as so-called alternative investments, to diversify your portfolio.
**Remember that with your EAP you have access to free 30-minute consults for financial matters and can use your session for financial coaching!**