Jump start the year by following some new habits that can benefit your financial situation. It’s good to begin the new year with some personal strategic planning. Set some long-term goals and identify some short term financial goals and activities that can help move you toward your long-term plan.
Track your net worth, which is the sum of your assets less your debts. Reviewing net worth on a regular basis helps you monitor progress toward your financial goals. Steady increases in your net worth can help motivate you to reach your goals and set new, higher goals.
Review your annual expenses and establish a spending plan for the coming year. Evaluate your spending habits over the past year and identify a few areas where you are over spending. Develop a plan to reduce spending in the areas you have targeted. For example, I frequently spend too much eating out. My goal is to improve meal planning and prepare enough for several meals every time I cook. This will make eating at home more convenient.
Rebalance your investment portfolio. Evaluate your current asset mix between stock, stock mutual funds and safer interest earning investments. Decide on the appropriate asset allocation for your risk tolerance, your current financial situation and your stage of life. It’s advisable to rebalance your portfolio on an annual basis. Set a target and stick to your plan - avoid emotional reactions to short term movements in the market.
When rebalancing your portfolio, try to minimize tax consequences by making changes within retirement accounts and sell stock and stock funds with higher basis, resulting in lower capital gains. If you own stock that has been losing money, consider selling at a loss to offset gains on other assets.
Save at least 10% of your income every year. Use this money to establish an emergency fund, pay down high interest debt or contribute to your retirement plan.
Maximize contributions to tax advantaged retirement accounts such as 401k plans and Roth IRAs. If you can’t afford to maximize your 401k, contribute at least enough to qualify for your employer’s match, if available.
Utilize technology to automate the payment of your bills to ensure they are paid on time. Pay yourself first, establish systematic contributions from your paycheck to retirement plans and savings account to meet your savings goals.
Review your insurance coverage to ensure you have adequate coverage and avoid paying for insurance that you no longer need. You may be paying a large premium on life insurance that is no longer needed, or your assets may have grown to a level that additional liability coverage is needed.I recommend conducting a comprehensive insurance review every three years or whenever you experience a major life change.Set long-term goals, review and monitor where you are and create an action plan for 2019 to move toward your goals.