5 Financial Resolutions to Consider for the New Year


With the end of another year upon us ‘tis the season for New Years resolutions.  Many of us might want to lose weight, change careers, eat healthier as examples.  A recent study by Fidelity indicated that only 31 percent of Americans would be making financial resolutions for 2015.  This is down from 43 percent at this time last year.

Do financial resolutions work?  According to the Fidelity study:

“For those who say they made a financial resolution at the start of 2014, more than one-half (51%) now feel they are better off financially. In contrast, only 38% of those who did not can say the same.” 

Here are 5 financial resolutions to consider for the New Year.

Take care of the basics 

Just like winning football teams, financial winners do the basics well.

  • If you are spending too much get a budget in place and more importantly develop a means to track your spending.
  • If debt is an issue work out a plan to get it paid down.
  • Buy life insurance if you need it.
  • Have a will or estate planning document in place that includes naming guardians for any minor children.
  • Make sure that all beneficiary designations for retirement plan accounts, annuities and life insurance policies are correct and up to date. 

Get a financial plan in place 

This is being a “financial grownup 101” so to speak.  As the saying goes “… failing to plan is planning to fail…”

If you have a financial plan resolve to review it at least once during 2015.

Seek financial advice if you need it 

Is 2015 the year to find the financial advisor who is right for you?  Is it the year to dump that advisor in whom you lack confidence or who fails to explain to you why you are in financial products that seem to put more money in his pocket than in yours?

Many of you reading this might be saying I can do this myself; I don’t need a financial advisor.  Reality check how has that worked out for you?  What did you do with your investments at the depth of the 2008-2009 market down turn?  Are you really on track for retirement?

If you don’t like the answers, suck it up and get the professional help you need.  At some point you get too old for financial do overs.  Check out this excellent guide to finding a financial advisor.  Perhaps an online financial advisor is the right choice, more and more options are available here seemingly every day. 

Review your investments on a regular basis 

  • Review and rebalance your portfolio at least annually.  This is a basic tool for risk control.
  • Review your individual investment holdings at least semi-annually.  This includes mutual funds, individual stocks, closed-end funds, ETFs and others.  Ask yourself why you own each holding, how does this investment compare to its peers, if would you buy it today and is the investment still meeting your expectations.
  • Be sure to review your investments and your asset allocation as an overall portfolio across all accounts.  This includes IRAs, 401(k)s and taxable accounts 

Take charge of your retirement savings 

If you are employed make sure that you are taking full advantage of your company’s 401(k) plan or similar retirement savings vehicle.  Don’t ignore this you will only regret it down the road.

  • Make sure that you have selected the best choices from the investment menu available to you.
  • Contribute the maximum that you can afford via salary deferral.  The 2015 maximum 401(k) deferral amounts are $18,000 for those under 50 and $24,000 for those who will be 50 or over at any point during 2015.  At the very least try to contribute at least enough to earn the full company match if one is offered.
  • If you will be leaving your current employer make sure that you make a proactive choice as to what to do with your 401(k) balance.  Leave it where it is, roll it to your new employer’s plan (if allowed and applicable) or roll it to an IRA account. 

Don’t forget about an IRA contribution.  Depending upon your situation you may or may not be able to contribute on a tax-deferred basis, this will depend upon your income and whether you are covered by a retirement plan at work.  A Roth IRA might be an option again there are income restrictions to be aware of.  A spousal IRA might also be an option for a non-working spouse under certain circumstances.

Are you self-employed?  Establish and fund a retirement plan for yourself, you work too hard not to.  There are a number of retirement plan options for the self-employed you can consider including a SEP-IRA and a Solo 401(k).

Especially if you are within 10-15 years of retirement make sure to get a copy of your Social Security statement and check it to ensure that you are getting credit for all earnings.  Note also that there are a number of Social Security claiming strategies that you might consider to maximize your benefits.

What are your financial resolutions?  No time like the present to get some in place.  What are you waiting for?

Please feel free to contact me with your questions. 

Check out an online service like Personal Capital to manage all of your accounts all in one place.  Also check out our Resources page for more tools and services that you might find useful.


Originally posted at https://thechicagofinancialplanner.com/5-financial-resolutions/

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