Ringing In the New Year
We’re just days away from ringing in the new year! It’s that time of year for resolutions… get in shape, tackle a cluttered garage, eat better, etc. In my work as a Daily Money Manager, I hear all sorts of Financial New Year’s Resolutions. Here are some of my favorites as well as practical advice on how to achieve them.
Save More for Retirement
Did you know one-third of adults have zero retirement savings? According to a 2017 Merrill Lynch study of 5,000 Americans age 25 and older, only 23% have less than $10,000 saved for retirement. If building your retirement savings is a 2018 goal, consider these options:
- Maximize your 401(k). Even if your employer doesn’t match funds, contribute as much as you’re allowed. Your savings will grow using pre-tax income that compounds returns over time.
- Open a Roth or SEP IRA. If you’re already maxed out your 401(k) contributions or you’re self-employed, talk to your financial advisor about opening an IRA — such as a Traditional, Roth or SEP IRA. They can help you determine the contribution limits and tax benefits based on your financial situation.
The average American has $16,883 in credit card debt, $50,626 in student loans, and $29,539 in auto loans. So it’s no surprise when clients put tackling debt at the top of their New Year’s Resolution list. Obviously not all debt is created equal. For example, a mortgage loan is better because it’s secured by real property at a lower interest rate. Unsecured debt can snowball, especially if your expenses often outpaces income each month. While it’s easy to use plastic to pay for goods and services, it’s creating hard-to-break habits. Want to owe less in 2019, then…
- Prioritize your debt by balance and interest rate. My clients are often surprised by the dollar amount because they haven’t added everything up. You can’t solve a problem you can’t clearly see. Map out minimum payments and interest rates. Sometimes starting small — the lowest payment — is easiest. Once one card is paid off, apply the “extra” to the next balance. This process will do two things: give you a sense of progress and getting into the habit of paying more than the minimum. Of course, you’ll need to stop adding to your debt. So put away those credit cards!
- Compare the interest rate on savings accounts versus credit cards. If you have a savings account earning 1%, consider paying off your high-interest rate credit card with the money. Once done, build up your savings again… hopefully at a faster pace to re-establish your emergency funds.
Most financial missteps are caused by not having a clear picture of what’s coming in and what’s going out.
- You need a financial dashboard. If you’re not already using a personal finance software program, 2018 is the perfect time to start. By downloading all transactions from all accounts into one place, you’ll have a dashboard showing the ebb and flow of your financial life. Reconciling your accounts and paying your bills on time are equivalent to eating your veggies… it’s necessary for your financial health.
- Everything has a place. Feel like you’re drowning in paper? One way to eliminate paper clutter is to set up electronic statements and a bill pay system. If you need the physical reminder, then create a filing system that works for you to handle bills as they come into your mailbox. A Daily Money Manager can help you set up either type of system. The important element is consistency.
Want Help With Your Financial New Year’s Resolutions?
Feel like your financial life is in disarray? Want help achieving your 2018 financial resolutions? Contact me for a complimentary 30-minute consultation.