Happy New Year! As you know, this is the time of year for making resolutions. Some people want to lose weight, quit smoking, or learn a second language. Others want to travel, volunteer, or read more. These are all great goals, but when you sit down to plan out your resolutions, spare a thought for your finances. There are several great financial resolutions most people could stand to focus on that could have a wonderful impact on your year.
Of course, it’s not uncommon to see someone resolve to spend less money, save more, or get out of debt. Those are all good, but let’s talk about a few financial resolutions you may not have thought of.
1. Pay Attention to Your Retirement Savings
If you haven’t yet retired, and have access to an employee retirement plan, like a 401(k), make sure you are taking advantage of all your plan has to offer. For starters, many people don’t contribute enough money to qualify for a matching contribution from their employer. But it’s the matching contribution that makes up a large part of any 401(k)’s value. So if you aren’t contributing enough for your company to match, it might be time for a change.
Another thing to find out is how your 401(k) is allocated. Any 401(k) is weighted for either less risk or more risk. Riskier investments usually give you a higher return, but with the risk of a longer fall if the investment goes sour. Most 401(k) plan providers, meaning whoever manages the plan, will put you in a default allocation. But the only way to find out if that default is right for you is to first verify what your allocation is. If it’s too risky, or too conservative, most employers will allow you to change it, within certain limits.
In short, make sure your 401(k) is customized for you. No one should ever have to be put in the same box as everyone else.
2. Stop Just Thinking about Retirement, and Start Planning for Retirement
For many people, retirement is some vague, far-off event in the nebulous future. For them, retirement is just something that will eventually happen, like losing a tooth, growing up, or growing old. But the truth is that retirement only happens if you make it happen. And to make it happen, you need to start now. Otherwise, when the time comes to retire, you may find out you can’t afford to.
The best way to make retirement a reality is to create a retirement plan … or even better, a full-blown financial plan. A good financial plan enables you to set your goals for after retirement, predict your expenses, then calculate how much you’ll need to earn, invest, or save in order to satisfy both. That way, as each day goes by, you’ll be able to know you’re doing what’s necessary to retire … instead of just hope you are. If nothing else, that knowledge is great for your peace of mind.
3. Review Your Insurance Needs
No one likes to talk about, think about, or pay for insurance. Yet insurance is a vital part of your finances. Let’s face it—no one can predict what life has in store for us. Life is full of wonderful things, but not everything in life is wonderful. Sickness, accidents, even age can all drain our finances dry. What’s worse, they can affect our loved ones, too, should they ever be forced to provide for us. So in 2013, bite the bullet and really think about insurance. Do you have enough life insurance to provide for your dependents if something happens to you? Can you still afford to pay your bills if an accident forces you to stop working? These aren’t always pleasant questions … but with just a little work, you can make the answers much better.
4. Create an Estate Plan
Take a look around you. Look at your home, your car, and your family heirlooms. These might seem like simple possessions, but they’re more than that. They’re assets. They’re part of your estate. That makes them very valuable. So to ensure your assets go to who you value most, you need to develop an estate plan. On one level, an estate plan is basically a set of directions to the court instructing what you want to happen to your assets after you’ve passed on. On a larger level, an estate plan consists of even more than that. Your will is part of your estate plan. So is your living will, which dictates what should happen to you if you can no longer make decisions regarding your finances or health. This is important, because if you don’t have these documents in order, state law decides what happens. No one wants that. After all, it’s your life ... shouldn’t you be the one in control of it?
The best thing about resolutions like these is the peace of mind that comes from achieving them. Believe me; it will make the rest of your year much easier knowing your finances are taken care of. And with that peace of mind comes a gift: the gift of time. Time you don’t have to spend on worrying … but on living.
Whatever your resolutions are, I wish you health and happiness throughout the year.
Good luck with your resolutions!