Lots of people make New Year’s resolutions at this time of the year. According to a survey conducted by Fidelity Investments, almost one-third of Americans plan to make financial resolutions for 2019.
The most common New Year’s resolutions cited by the survey respondents were saving more money (48 percent), paying down debt (29 percent) and spending less money (15 percent). In addition to these popular resolutions, here are 7 more financial resolutions to consider making for the new year.
- Set financial goals. “If you don’t know where you’re going, any path will get you there,” the old saying goes. Charting a financial path for the new year requires setting clear and measurable goals. Your financial goals can be based on whatever you think are the most important aspects of your financial life.
For example, maybe you want to pay down the balances on high-interest credit cards that have crept up recently. Or maybe you want to establish and fund a rainy-day savings account. Whatever your goals are, be sure to write them down so you can refer back to them throughout the year.
- Create — and stick to — a household budget. This is the first step toward getting a handle on their personal finances for many people. It’s hard to set, much less achieve, most financial goals without a clear sense of how much money is coming in and going out each month.
A budget doesn’t have to be fancy or complex. Start by listing all your sources of income and all your expenses each month. Hopefully your income exceeds your expenses. If not, determine which expenses you can reduce or eliminate to bring your monthly budget into balance.
- Monitor your credit report. You can obtain a free copy of your credit report from each of the three major credit reporting bureaus (Equifax, TransUnion and Experian) by visiting annualcreditreport.com. This enables you to check your credit three times a year for free by ordering a copy of your credit report from each reporting bureau every four months.
Don’t be fooled by some other websites that purport to offer free credit reports — some of them charge hidden fees. Annualcreditreport.com is the only official website that is required by federal law to provide free annual credit reports. Type this web address into your browser instead of clicking on a link to make sure you go to the right site.
- Max out your retirement plan contributions. In 2019, you can contribute up to $19,000 to your 401(k) retirement plan, or $25,000 if you’re 50 years of age or over. This doesn’t include an employer match if one is available to you. And you can also contribute up to $6,000 in 2019 to your IRA.
If you can’t contribute this much, many financial experts recommend contributing at least enough to your 401(k) to receive an employer match if one is offered. Employer matches represent a guaranteed return on your investment with zero market risk.
- Rebalance your investment portfolio. Over time, changes in the markets can alter the mix and balance of asset classes in your portfolio. This will affect your asset allocation, or the percentage of stocks, bonds and cash equivalents you own.
When this occurs, you may need to rebalance your portfolio to restore the proper mix of asset classes. For example, recent declines in the stock market could result in your portfolio being under-weighted in equities. If so, you could sell some bonds or cash instruments and use the money to buy stocks in order to bring your portfolio back into the proper balance.
- Open and fund a Health Savings Account (HSA). HSAs are one of the most flexible savings tools available today. After you turn 65 years old, you can withdraw HSA funds for any purpose, not just to pay for medical costs, without paying a penalty. Note that if funds are used to pay for non-medical costs, income taxes must be paid on these withdrawals.
HSAs are also a tax-friendly savings account. You can deduct contributions from gross income, thus reducing current taxes, while HSA funds grow tax-free. And if withdrawals are used to pay for qualifying medical expenses, they are tax- and penalty-free.
- Educate yourself financially. One good way to do this is to subscribe to a personal finance podcast. There are lots of different podcasts to choose from covering a wide range of topics — from investing for retirement and saving for college to paying off debt and using credit wisely.
Another good way is to read a personal finance book. Again, there are hundreds to choose from, depending on where your interests lie. Highlight the material that you find most useful and also take notes so you can put what you learn into practice.
Please contact us if you would like to discuss these or any other New Year’s financial resolutions you’d like to make.