Writing down your financial goals for this year and having them visible is essential to your success. Much like a written financial plan, you are more likely to follow your financial goals when they are in writing.
After you’ve written down your goals, tell others about them, your progress, and your failures to help you be accountable to them. Here are eight financial goals to implement this year to help set you up for financial security:
Goal #1 Decrease spending
The less you spend, the more you can save in an emergency fund. This year try to reduce your spending habits, or save for retirement. Review your spending each month to determine what you can eliminate or decrease spending. The beginning of the year is a great time to take control of your financial future.
Goal #2 Reduce debt
If you carry credit card debt month after month, make this the year you pay off your debt. In addition close credit card accounts you don’t plan to use. Remember that managing your credit cards by paying them off each month will improve your credit score and enable access to better rates.
You may also want to consider paying down your mortgage, refinancing, or moving to a home that costs less. Also, reduce your debt by paying off your auto loan, increasing your monthly payment, or refinancing the remaining term at a lower rate.
Start reducing your debt by using financial calculators or consult your financial professional to determine if these ideas are appropriate for you.
Goal #3 Establish an Emergency Fund
Start with a minimum of one month’s expenses. A fully-funded emergency fund should have six months or more of expenses. It should be in an account that you won’t access and one that’s not tied to market performance.
Goal #4 Review your life insurance coverage
If you haven’t reviewed your life insurance coverage over the past few years, now is a great time to determine if you have enough death benefit coverage. Financial circumstances can change, and having enough to cover your debts. In addition, providing for your loved ones is essential to their financial security. Also, review and update beneficiary information to help ensure a timely life insurance settlement goes to whom you intend.
Goal #5 Save for Retirement
Set automatic retirement savings contributions to automatically increase year over year. In addition, make an effort to maximize your contributions this year. Confirm if your employer offers a match. If so, be sure to contribute enough to your employer’s pre-tax retirement savings plan to receive your employer’s matching dollars. If you’re not saving enough to receive a matching contribution from your employer (commonly a 2-4% match), you’re throwing away ‘free money.’
Goal #6 Take Some Risk
If you have your retirement savings in an interest-bearing account outside of the stock market, you will not keep up with inflation in retirement over time. Having 100% of your retirement savings tied to stocks may not be best for you. In addition, all of it outside the market may not be best either. Meet with your financial professional to determine your risk tolerance and portfolio allocations appropriate to your situation.
Goal #7 Be Mindful of Future Taxes
Part of your retirement savings should be in tax-sheltered investments and some in after-tax investments Discuss how each may impact your taxes in retirement with your financial and tax professionals. They can help you determine a tax-savings strategy for your situation. Remember that the closer you are to retirement, the more tax planning will benefit you later.
Goal #8 Monitor All of Your Investments
Meet with your financial professional for a financial review at least yearly to determine if your risk tolerance reflects in your investment choices and your timeline for retirement are all on target.
Receiving guidance from a financial professional is another way to help you be accountable to yourself and implement your financial goals this year.
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