request info email to friend
Financial Resolutions for the New Year
The start of the new year is a traditional time for resolving to do better: lose weight, stop smoking, spend more time with the kids, etc. But you also should take steps to get your finances in order. This is a good time to consider:
Budgeting. Keep track of what you spend for a couple of months, and then look at where your money went. Divide your spending into four basic categories. Fixed expenses are those that remain the same every month, such as your mortgage, loan payments, etc. Variable expenses can change from month to month; these can include food, telephone, gas, clothes, etc. Periodic expenses are large costs that you incur only a few times a year, such as holiday spending or vacation. And discretionary spending is for things that you don’t necessarily need but want, such as Starbuck’s.
Saving. Next, see if there are places you could cut back. For example, could you refinance your mortgage at a lower rate? Do you have a cable TV package that includes channels you don’t watch? Could you go out to eat less? Then save that money. Start with building up a rainy-day fund, then invest for your retirement or other needs.
Retirement planning. Meet with your financial adviser to make sure your retirement savings plan is still on track. Do your investments still reflect your level of comfort with risk? Are your returns where you expected? Is your portfolio sufficiently diversified? Make any adjustments you need.
Beneficiaries. Make sure your beneficiaries – both primary and secondary – are up to date on insurance policies, 401(k) plans, etc. Have you recently married or divorced? Had additional children or grandchildren? If so, you may need to update your beneficiary choices.
Your will. If you don’t have one, you should. If you have not updated your will for several years, you should take a look at it. If your family situation has changed – for example, if you have married or had children since you made the will – you might need to update it. If your financial situation has changed, you might want to take another look at things like bequests and trusts.
Life insurance. This is another area where your needs can change as your life situation changes. For example, if you have young children, you might want to increase the amount of coverage you have to ensure that they will have the money they need for college and other expenses if something happens to you. On the other hand, if your children have grown, you might want to restructure your life insurance.
Other insurance. Home prices are rising again, so this is a good time to make sure your coverage limits are adequate. Also check to make sure that any valuable items such as jewelry, art or collectibles have adequate coverage.
Estate planning. It is a good idea to revisit your estate plan periodically to make sure you don’t want to make any changes or updates.
Important papers. Do you know where your will is? The deed to your house, or the title to your car? Locate your important documents, and put them somewhere like a safe-deposit box or a fireproof home safe.