In a few weeks there’s a good chance you’ll make some New Year’s Resolutions — for example, to lose weight, eat healthier or exercise more. As you think about your resolutions for 2017, here’s an idea: Try making some New Year’s financial resolutions.
Here are 5 financial resolutions that could help make 2017 your best financial year ever:
1. Manage your debt efficiently This is one of the most common financial resolutions, and for good reason: Excessive and irresponsible debt is one of the biggest hindrances to financial success for many people. Think about it this way: Every dollar that you’re paying toward bad debt is a dollar that you can’t put toward a long-term financial goal like retirement or your children’s college educations.
You should talk to your financial advisor about ways to manage your debt most efficiently. Debt is not always a bad thing — it can often be used by affluent individuals and families as an effective financial tool. Home mortgages and tax-advantaged home equity lines of credit are a good example. It might make sense to restructure your existing debt — for example, by moving to fixed-rate loans given the fact that interest rates are on the rise.
2. Control your spending. This goes hand in hand with staying out of debt. It won’t do you any good to manage your debt effectively if you can’t control your spending.
Unlike the performance of your investment portfolio or the rate of inflation, your spending is the one financial variable in your household that you can control. Even high net worth and affluent individuals and families can get into spending trouble. If you find yourself consistently spending more money than you probably should, sit down with your spouse and come up with a plan to curb your spending and bring it more in line with your income.
3. Max out your retirement savings. Regardless of the type of retirement account you have, resolve to contribute as much money as you possibly can to the account in 2017. Divide the annual contribution limit by 12 and then have this much money automatically transferred into your retirement account each month. Or if you’re paid biweekly, divide the contribution limit by 26.
4. Evaluate your asset allocations. Your investment portfolio is not something you should place on auto-pilot. Instead, plan to sit down with your financial advisor to take a fresh look at your current asset allocations and confirm that they are still in line with your risk tolerance and time horizon.
Over time, the mix of asset classes in your portfolio will shift as the markets fluctuate. This will affect your asset allocation — or the percentage of your portfolio that consists of stocks, bonds and cash instruments. When this happens, it may be necessary to sell some asset classes and buy others to bring your portfolio back into the right balance to meet your long-term investing goals.
5. Plan your charitable contribution strategy. You may have goals for how much money you’d like to earn next year. But have you thought about how much money you’d like to give? Many people haven’t. You may also reap significant tax benefits by giving away money and assets to qualified charitable organizations.
One strategy adopted by many individuals and families is to give away a certain percentage of your pre-tax income. For example, many people give away 10 percent of their income — this is sometimes referred to as the tithe, which literally means “the tenth,” or 10 percent. Resolve to give money to causes you’re passionate about next year — or to give away more money if you’ve been a consistent giver in the past.
Contact us if you’d like to discuss your financial resolutions and how we can help you achieve them.