1. Asses your financial risks and prepare for disruptions. These days, everything is changing at such a fast pace that you can’t ever really be sure what’s going to happen next. We all know that there are some things that we’re just not going to be able to predict or prepare for but that’s all the more reason why we shouldn’t ignore the risks that we do know about. For example, some risks that are easily identifiable are having no retirement plan, being under-insured, or not having a diverse portfolio. Once you’ve identified the obvious risks, you can begin taking steps to reduce them.
2. Take a close look at your current finances and set goals for the year. The best place to start is to review your assets and liabilities but you also need to spend time learning about money and how to use that knowledge in your day to day life to improve your overall financial picture. For example, if you’re trying to pay off credit card debt, you not only need to pay down what you currently have but you also have to stop spending. Setting long-term goals helps with short-term spending, too. If you and your spouse are hoping to save up enough money to pay for your child to go to college, sit down and figure out how many years you’ll need to save and how much you need every year and month. Big, long-term goals are easy to put off which is why it’s important to put a plan in place to achieve them.
3. Stick to a budget. Whether you plan month to month or plot out the whole year, budgeting is an easy and effective way to distinguish necessary spending from unnecessary spending because the numbers are all there in black and white. Although it’s not always easy, you should treat savings as a part of your expenses and work it into your budget. A good goal is to save between 15 to 25% of your income every year.
4. Make sure your assets are taken care of. If you don’t have a will, there’s no better time to get one than right now. Name your beneficiaries and executors, get your assets and investments in order, and make sure you have adequate life and health insurance coverage so you’re not creating a financial burden for your family.
5. Include family in your planning. While it’s important to include your spouse or partner in your planning, you should also keep your children in the loop as it’s a great opportunity to teach them about money. They’ll get first-hand experience with budgeting, saving money, compound interest, and basically learn a little more about the true value of a dollar.
6. Build wealth like a pyramid. At the bottom, you should have a solid base of savings and liquid investments. Next, adequate life and health insurance to cover you in the event of an emergency. The next level up is an investment portfolio, equity, and debt then, finally, the top of the pyramid is alternative investments like real estate.
7. Carefully consider adding anything new. These days, our inboxes are bombarded with new products, websites, and services. Emerging technology and exciting new services are tempting but don’t always fit nicely into the broader picture. Before making any new investments or taking on any more debt, think carefully about wants and needs.
8. Prepare for tax time. If you suspect that your employer isn’t providing adequate tax benefits, think about taking matters into your own hands with monthly tax savings so you don’t end up with any surprises.
9. Taking out good loans is okay when necessary but to clean up your finances you should avoid bad loans completely. Long-term loans like mortgages are generally fine and don’t negatively affect your overall financial health unless you’re unable to make the payments. Short-term debt like credit card loans and personal loans should be avoided if possible.
10. Be honest at tax time. While there are income tax rules that benefit investors by allowing us to invest in certain products for exemptions, a lot of people try to save even more by generating unaccounted income. While it might seem like you’ve gotten away with it in the short term, eventually, you won’t be able to hide any unaccounted income from the IRS. In fact, once you get caught, you’ll likely be hit with fines that exceed what you would have ended up paying in taxes the first place or even worse.
In 2019, if you want to make improvements to your life that will set you up for success in for years to come, it’s important to take your financial health into consideration. Everyone promises to eat better or exercise more at the start of a new year but evaluating your finances and making the necessary changes is just as important for a long, healthy life.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Tom Fleishel and not necessarily those of Raymond James.
Investments mentioned may not be suitable for all investors.
You should discuss any tax or legal matters with the appropriate professional.
Investing involves risk and investors may incur a profit or a loss.