Many of us make New Year's Resolutions. We tend to see the beginning of a new year as a good place to begin new changes we would like to incorporate into our daily life. For the vast majority of Americans, resolutions tend to be of two types, weight loss or financial gain. While weight loss may help you look and feel great, and is certainly an excellent choice for promoting a long, healthy life, it is your financial health that is the real key to providing stability and comfort for that long healthy life - right into retirement. So what are some financial resolutions you may want to implement in the new year? Here are a few suggestions from paycheckcity.com:
Update your savings and reduce your debt-
- Set new savings goals. To help you reach your goal, be sure to transfer amounts earmarked for savings from your checking account to a separate savings account that is not easily accessed, making it less tempting for you to spend the money that you have managed to save.
- Review your W-4.Have there been any major life changes recently? A new baby, buying or selling a home, a change in marital status - all result in a need to adjust your W-4. By using the free, easy to use calculators at paycheckcity.com, you will be able to assess different scenarios to figure out what works best for you. The result could be more money in your pocket each payday to put towards savings or debt reduction.
- If possible, pay extra principal toward your mortgage payments each month. You'll cut down on the number of years it will take to pay off your mortgage and earns a risk-free return on that money equal to your mortgage interest rate.
- Reduce credit card debt as much as possible.If you owe money on your credit cards, determine how much you can realistically afford to pay off during the year. In addition, try not to charge new purchases on those cards while you're trying to pay down what you owe. If you have high interest credit card balances, consider whether it would be more beneficial to pay off those high interest debts or to add to your savings.
Boost your retirement
- Review your retirement plan and consider a set contribution each month. In addition, ask your employer to withhold enough through salary deferrals to ensure that you reach the maximum limit each year. If you're 50 or older by December 31, increase your contribution for the additional 'catch-up contributions' you're allowed to make. Be sure to save only amounts that you can realistically afford.
- Self-employed? If so, depending on your income, you can contribute to an SEP IRA, profit-sharing plan or solo 401(k) plan. If you'll be 50 or older by December 31, the contribution limit jumps for a solo 401(k), helping you save even more.
- Don't Forget About IRAs. Even if you're covered under a retirement plan at work, you can contribute to a Traditional IRA or Roth IRA. Keep in mind, however, that there are limitations to these contributions depending on income.
Additional helpful resolutions-
- Review and adjust your investment portfolio. Things change each year, and by doing this you take steps to optimize your portfolio based on the most current trends.
- Review your credit report and repair any negative items. Be careful to spot errors since they are not uncommon. Everyone is entitled to three free credit reports each year. This is extremely important since a poor credit rating could result in paying higher interest rates on loans, reducing disposable income.
- Review life insurance and disability insurance needs. Give some thought to how much protection you need, make adjustments if necessary, and give some thought to whether your needs would be better satisfied by term or permanent life insurance. Also, review your disability insurance coverage to determine whether you have enough coverage.
Be cautious about setting too many or unrealistic financial goals. Restate your financial resolutions simply and clearly for the new year. Consider meeting with a financial adviser to discuss your goals, they can be very helpful in navigating the choppy waters of personal finance.
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.