2018 Resolutions to Enhance Your Financial Health

Lynn A. Ferraina  |  èBella Magazine  |  Updated for accuracy and clarity

2018 is upon us! As we start compiling New Year’s resolutions, the primary focus is usually to improve our health or maybe to lose those extra pounds gained during the holidays.

But how about making some resolutions to improve your financial health as well? Here are some ways to get started:

Dump the Debt

Not only may we have eaten too much at holiday time, we may have spent too much as well. Make a commitment to pay off credit card debt as soon as possible. Many credit cards, especially store credit cards, can have interest rates in excess of 18 percent. Get in the habit of paying off your credit cards in full each month to avoid racking up high balances and interest accumulations. Review your credit scores with one of the three major providers (Equifax, Experian or Transamerica) to avoid potential identity theft.

Set an Investment Goal

If you are still working, make a commitment to max out your company’s retirement plan. Many companies offer to match a certain percentage of their employee’s contribution. For example, if you put 5 percent of your salary in your 401(k) and your company matches 3 percent, that’s a 3 percent raise. If your company doesn’t offer a plan, you can create your own by establishing an IRA (individual retirement account). You are allowed to deposit up to $5,500 in 2018 (or $6,500 if you are over age 50).

When depositing to a 401(k) or IRA, not only does it help you save for retirement, but it gives you a nice tax break as well. If you have old 401(k) plans from previous employers, consider consolidating by rolling over your old plans to the IRA you have established.

Review your Investment Plans

Whether you are still working or retired, it’s a good idea to see how last year’s financial plan met (or didn’t meet) your financial objectives. Is your current asset allocation working to achieve your short- and long-term goals? Financial objectives to consider each year are: time horizon, risk tolerance, how much you need to invest each year to meet your goals, and what investment vehicles to use to keep your plan on track.

Save for Emergencies

Before investing for the long term, make sure you have liquid funds available to cover short-term emergencies so you will not be forced to sell long-term holdings at market value. Six months of living expenses is advisable.

Check your Coverage

At the beginning of the year, it is also a good time to review your insurance plans. Make sure you are adequately covered for all of life’s contingencies, including health, life, homeowners, auto, disability and long-term care insurance.

Avoid Estate Issues

Reviewing your legal plans every other year or when you experience a life change is important as laws change all the time. Evaluate your will, trust, health care surrogate, living will and power of attorney to make sure they reflect current laws and your current wishes. Also, review your beneficiary options on life insurance, annuities, pension plans, IRAS, and 401(k)s to make sure they are correct and consistent with your legal documents.

Seek Professional Advice

Most people cannot do it alone. Advisors have years of education and experience to help you find the gaps in your current plans. They also have witnessed mistakes people make and know how to avoid them.

Establish Systems

One word that generally turns folks off is the word “budget.” Instead, I refer to it as a “system” to know what you own, what you owe, and what your income and taxes are. Basically, it is a way to keep track of what you spend and save each year. It should also include a “system” to list where your personal information and documents are, including your passwords, tax returns, insurance information, investments, legal documents and a listing of who you do business with (your financial advisor, lawyer, CPA, insurance agent, bank, etc.).

This system is crucial if you become ill or incapacitated, so that your previously named, trusted advocate can walk right in and take over your financial life if you can’t.

Downsize

If you haven’t worn an article of clothing or won’t be using a particular item in the future, start to downsize your closet and your life. There is something rewarding about giving away what we no longer need. Not only do you help your favorite charity, but you may receive a tax deduction as a reward for your giving nature.

Now is the time to review and set your 2018 financial resolutions. Good luck and may 2018 be a financially productive year!