A 2018 survey conducted by NPR and The Marist Poll in 2018 suggested getting in shape was one of, if not the most, popular new year’s resolution with one in three resolution-makers hoping to achieve a health-related goal. While exercising is a great New Year’s Resolution, getting your finances in shape should be at the top of your list, too. There are a few key things you can do to get your finances in order and make sure you are on track for the New Year.
Financial Resolution # 1: Create a budget for life
When it comes to finances, life can be viewed as cash flowing in—and out. Saving and investing during your working years, if you stick with it, should lead to a rising net worth over time, enabling you to achieve many of life’s most important goals. Creating your own budget and net worth statement can help you build your road map and stay on track. Here are quick steps that can help:
Create a budget and pay yourself first.
Calculate your personal net worth annually.
Project the cost of essential big-ticket items.
Retired? Invest your living-expense money conservatively.
Prepare for emergencies.
Financial Resolution # 2: Manage your debt
Debt is neither inherently good nor bad—it’s simply a tool. For most people, some level of debt is a practical necessity, especially to purchase an expensive long-term asset to pay back over time, such as a home. However, problems arise when debt becomes the master, not the other way around. Here’s how to stay in charge of your debt:
Keep your total debt load manageable.
Eliminate high-cost, non-deductible consumer debt.
Match repayment terms to your time horizons.
Financial Resolution # 3: Optimize your portfolio
We all share the goal of getting better investment results. But research shows the timing of markets is difficult and can be counter-productive. So create a plan that will help you stay disciplined in all kinds of markets. Follow your plan and adjust it as needed. These quick ideas can help you stay focused on your goals:
Focus first and foremost on your overall investment mix.
Diversify across and within asset classes.
Consider taxes.
Monitor and rebalance your portfolio as needed.
Financial Resolution # 4: Prepare for the unexpected
Risk is a part of life, particularly in investments and finance. Your financial life can be upended by all kinds of surprises—an illness, job loss, disability, death, natural disasters or lawsuits. If you don’t have enough assets to self-insure against major risks, make a resolution to get your insurance needs covered. Insurance helps protect against unforeseen events that don’t happen often but are expensive to manage yourself when they do. These quick guidelines can help you prepare for life’s unexpected moments:
Protect against large medical expenses with health insurance.
Purchase life insurance if you have dependents or other obligations.
Protect your earning power with long-term disability insurance.
Protect your physical assets with property-casualty insurance.
Obtain additional liability coverage, if needed.
Consider the pros and cons of long-term-care insurance.
Create a disaster plan for your safety and peace of mind.
Financial Resolution # 5: Protect your estate
An estate plan may seem like something only for the wealthy. But, there are simple steps everyone should take. Without proper beneficiary designations, a will and other basic steps, the fate of your assets or minor children may be decided by attorneys and tax agencies. Taxes and attorneys’ fees can eat away at these assets, and delay the distribution of assets just when your heirs need them most. Here’s how to protect your estate—and your loved ones:
Review your beneficiaries, especially for retirement accounts, annuities, and life insurance.
Update or prepare your will.
Coordinate asset titling with the rest of your estate plan.
Have in place durable powers of attorney for health care.
Consider creating a revocable living trust.
Take care of important estate documents.
Let the New Year be a great time to start fresh and get your finances in order. Understanding where your money is going, what your finances are doing for you, why your portfolio is growing (or not), and how to secure your finances will make all the difference if you take the time to plan. Follow these tips and you will be on your way to financial success in the New Year!
If you have any questions about your financial plan or want to consider financial opportunities, contact our team at Millennium Capital Advisors today.