It is that time of year again. The time when you reflect on what is important to you, revisit your values, and make resolutions for changes in the new year. Out with the old and in with the new!
This is also a great time to revisit your financial goals and desires. Ask yourself what you can do over the next year to declutter your financial life and achieve your long-term goals. Below are seven resolutions to get you started.
1 – Review Your Credit Reports
You can obtain free credit reports online from each of the three major credit bureaus: Transunion, Experian and Equifax. Ensure that your information is correct, including the credit cards or loans in your name and the credit payment history. We recommend monitoring your credit throughout the year, instead of just once in January. You can do this by requesting one report every four months from a different bureau, since you are entitled to one free report from each bureau annually. You also may want to consider a credit monitoring company such as LifeLock or Credit Karma to help you keep a proactive eye on activity. If you are deeply concerned about fraud and/or identity theft, we recommend instituting a credit freeze.
2 – Increase Your Retirement Plan Contributions
Increase your retirement plan contributions to the maximum you can afford. Change your employer retirement plan (i.e. 401(k), 403(b)) contribution to ensure you are maximizing the impact of your contributions. The maximum contribution has increased to $19,000 in 2019 ($25,000 for those over age 50). If you change your contribution amount to a percentage of salary, as opposed to a dollar amount, the amount of your contribution will automatically increase when you receive a raise. For those who receive a company match, review your contributions to ensure you are taking full advantage of the matching amounts.
3 – Rebalance Your Investment Portfolio
Your investment policy statement reflects an original goal of equity versus fixed-income investments. The recent market volatility provides an opportunity to reset your portfolio to be in line with your long-term goals. This will automatically cause you to sell certain investments that have grown and purchase assets that are at a value. It is also a good time to review whether any individual assets need to be replaced.
4 – Understand Your Cash Flow and Create a Savings Plan
Begin by reviewing your living expenses from last year to determine where money was spent, and note which expenses are recurring vs. a one-time or unusual item. Use this information to prepare a budget for the new year, including a plan to pay down credit card debt by paying off the higher interest rate cards and loans first. You should also address your savings. If you are not contributing to a 401(k) or 403(b), we recommend starting immediately, as the amount you save will continue to grow over time. To ensure the savings happens on a regular basis and increase the likelihood of meeting your goals, we highly recommend automating your deposits.
5 – Protect Yourself
Just like changing the batteries in your fire alarms at Daylight Savings (if you do not do this already – you should), the new year is a great time to update and improve your password protection on all websites you frequent. Consider 10-character passwords with a mix of letters, numbers, symbols, and cases. Understanding that you have a lot of passwords to remember, consider a favorite phrase from a movie or book, or a lyric from a song. Like Shakespeare? How about “2Bornot2b” (To Be or Not to Be), followed by your favorite number or year. These examples may be easier for you to remember than a complex password. Additional options include using two-factor authentication or a password manager to improve the overall security of your digital footprint.
6 – Purge Your Files
Determine what documents you need to keep for tax or other purposes. If possible, scan the ones you need to keep or create a secure filing system for the paper copies. When discarding documents that contain personal information, be sure to shred them.
7 – Review Beneficiary Designations
Ensure the beneficiary designations on your retirement accounts and life insurance policies are still appropriate. Your Will does not necessarily govern who will receive the benefits of retirement accounts and life insurance policies at your death. All too frequently individuals forget to update these designations after divorce, remarriage, or the birth of a child, unwittingly cutting a love one from an inheritance.
It may feel intimidating to declare a resolution; and the truth is many are not achieved, as people make promises that are too big or too vague. To ensure the success of your long-term goals, consider resolutions that are manageable and include tasks that can be completed in short order. None of the ideas above are time-consuming and all can be completed with minimal interruption to your daily life. You might even notice that, once complete, you have reduced a little stress as well!
