As we left 2008 behind we left behind a very difficult year financially for most Americans and for most other countries in the world. As tradition tells us, with the start of a new year brings the onslaught of New Year's Resolutions. This year consider making your Top 10 Goals something to do with your financial goals instead of losing weight or stopping smoking. There is a reason for this suggestion - keep reading.
Money impacts so many areas of our lives, so much so that we don't realize how much we are stressed because of finances. We eat because money is short, we don't excercise because our money is short, we fight with our spouses because money is short - in fact we do many things that we try to quit with our New Years Resolutions. In the end however, these things that we resolve ourselves to quitting are only symptoms of our money problems.
So why not this year and for every year after make a New Year's Resolution about your finances and see how that impacts the other areas of your life. Start with a reality check -- and then get smarter about your investments, retirement plans and your home.
Accurately Assess My Financial Situation
Examine your bank statements for the past 12 months. Are you a credit spendthrift who shells out more on monthly interest payments than on basic necessities? Are you a risk-averse saver whose only asset is cash? If you maintain your current asset allocation, will you ever be able to retire?
Make an honest assessment of where you are. What does your credit card debt situation look like? Have you made sufficient contributions to your 401(k)? If you do not really know or acknowledge where you are, you are counting on luck to make a better financial future.
After appraising your finances, set realistic goals. Resolve to save by increasing contributions to your 401(k) account and eliminating nonessential expenditures, such as your budget for dining out, the gym membership you rarely use or the taxicabs you regularly take instead of the less convenient transit system.
Diversify My Assets -To Protect My Nest Egg
A well-diversified portfolio used to mean owning a mutual fund with an array of stocks from different sectors. Not anymore. Today, diversifying means holding assets that have little to no correlation with the stock market. Discuss with a good financial planner to get the best advice on what to invest in.
Contribute More To My 401(k) - Or Start Contributing
The last thing investors should do now is sell their 401(k) holdings. Doing so would lock in losses and make catching the recovery less likely. Investors should consider buying more stocks for their 401(k) accounts and increasing their contributions over the next couple of years. If you are an investor with a longer timeline, now is a good time to buy. At least continue to contribute the percentage of income that their companies match. Otherwise, you not saving yourself from a downturn – you are losing out on an additional 3% to 5% of salary.
Stop Obsessively Checking My 401(k) Performance
Save yourself the stress of constantly checking your 401(k) performance. For long-term investors, there is not much you can do anyway. Be patient – the market and economy will rebound.
Improve My Credit Report and Credit Scores
Obtain credit reports in order to ascertain your creditworthiness and note what might be a negative to lenders. Resolve any issues now. A better credit rating means banks will charge less to lend to you. For homeowners, that means potentially refinancing at lower interest rates. For those with credit card debt, it means possibly obtaining a card that charges low or zero interest for a time, enabling you to pay off bills more quickly.
The second step to improving your credit is paying off those credit card bills. Either pay off the cards with the highest interest rates first or pay off some of your lower-interest cards in full, enabling you to better organize your debt by reducing the number of creditors to manage.
Stop Thinking Of My Home As A Lending Institution or Get-Rich-Quick Scheme
Home prices typically did not increase 12% to 20% a year. Property values grew at a more modest rate of 3% to 5% a year. Such rates are what people should likely expect for the foreseeable future. Ask yourself what is your house to you? If it is an investment property, you may want to rethink your ownership of it. Most people look at their house as a place to live.
Get Home Reappraised - Lower Real Estate Taxes
A small benefit of your home's decrease in value is that you should owe less property tax. However, you will not realize the tax benefits unless your property is reassessed. If you think your home is worth less, pay an appraiser to re-evaluate the property, and submit the new assessment to the municipality. If your home value has fallen significantly since your last assessment, it may be worth paying a lawyer, if necessary, to contest your latest property tax bill.
Budget For Charitable Giving - Make A Difference - Tax Benefits
Do not forget those less fortunate when you are feeling less fortunate yourself. Not only do charitable donations help you save on your taxes, but helping others can have a positive impact on your psyche and, if enough people donate to domestic causes, the economy. You also get a tax deduction for volunteering for a charity rather than donating money.
Review My Utility Company, Internet, and Cell Phone Contracts
The bills you routinely pay for services such as long distance, unlimited mobile phone use and cable TV have likely increased. Renegotiate those contracts. Sign up for a new phone contract with fewer minutes or qualify for special deals that the company is advertising to entice new customers. These companies do not call and say, 'Hey we've got something cheaper.” You have to review your contracts.
Again, make this New Years Resolutions your Top 10 Financial Goals - you may just find that this helps you resolve some of those other bad habits that you want to impact. Good luck.
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