So many of us seem to have a love/hate relationship with New Year’s resolutions. Every year, we create resolutions, only to push them to the back of our minds by April. If this scenario sounds familiar, you’re not alone. Studies show that only 8% of people are successful in achieving any of their resolutions.
Finance-related resolutions are the third most popular New Year’s resolution, following self improvement and weight loss. Millions of people strive to get out of debt, save more, or accomplish a financial milestone, whether that’s purchasing a vacation home or retiring. Just because resolutions are hard to accomplish doesn’t mean they have to be impossible. With an action plan in hand, you’ll have greater success at accomplishing your financial goals. Here is our ten step plan designed to help you get financially fit in 2016:
1. Set Specific Goals
You can’t work toward a resolution without knowing what you want to accomplish. The more specific your goals, the better chance you have at achieving them. Rather than say you want to save more money, create an ideal amount you’d like to save each month with a concrete reason behind it. For example, perhaps by December 2016, you want to save an additional $30,000; half for an emergency cushion and half for a trip to Europe.
2. Create a Budget
A budget is critical for staying on track with your spending, no matter how much money you make. In fact, the higher your income, the more difficult it can be to create a balanced budget. Taking into consideration your goals, income, debt, and expenses, set a budget. Determine how much you want to spend per month and identify any areas where you can cut back on spending. Be sure you have 3-6 months of living expenses saved for emergencies. By creating a budget, you put resources towards your highest priorities, instead of spending mindlessly.
3. Find a Financial Workout Buddy
You’ve set your goals and laid out a budget. Now you need a workout buddy. In fitness, having a workout buddy can help you stick to a plan and improve your performance. Having a partner holds you accountable and inspires you to push harder, even when the going gets tough. It’s easy to slack on your budget or slip up on following your goals when you don’t have someone holding you accountable. Find a financial advisor you trust to help you set your goals, stay on track, and provide advice when you need it.
4. Make Sure You’re Saving Enough
Over 46% of Americans are putting less than 5% of their income into long-term savings. Even those who are saving 5% are still not saving enough. Whether retirement is on the horizon or several decades away, it’s important to start saving as early as possible. If possible, aim to save around 15%-20% of your annual income for your retirement. At Engaging Women in Wealth, we help our clients balance the high cost of living and paying down debt with saving enough to pursue financial freedom. If you haven’t been saving enough in the past, make this the year that you double down toward your future.
5. Review Your Insurance Coverage and Estate Plan
A lot can happen in a year. As we experience life changes, from the birth of a child to marriage to a new career, it’s important to regularly review your insurance coverage and your designated beneficiaries. As we enter a new year, now is the ideal time to review your current insurance policies and make sure they are up-to-date. At Engaging Women in Wealth, we can also help you determine if now is the time to consider other types of insurance you may not currently have, such as long-term care insurance. Additionally, we work closely with Estate Planning professionals to update your plan as your family’s needs change.
6. Get Tax Paperwork in Order
Come January, Tax Day is just four months away. Rather than wait until late March to locate your W-2 and business receipts, start gathering your paperwork as early as possible, including which deductions you plan to itemize. Make an appointment with your CPA before their schedule fills up and coordinate with your financial advisor as needed.
7. Assess Your Risk Tolerance
As the markets shift and as you experience new circumstances in your life, your risk tolerance may change. For example, if you’re approaching the end of your career and are focused on preserving what you’ve accumulated, you’ll want to take less risk. Start 2016 off on the right foot by reevaluating your risk tolerance with your financial advisor, and make adjustments to your portfolio if needed.
8. Order Your Credit Report
Only 42% of Americans know their credit score and just 16% understand how credit scoring works. Unless you’ve recently applied for a loan, it’s likely been awhile since you last checked your credit score and it’s time to order your credit report. Not only does a credit report reveal your score, but it also gives you the opportunity to check for and fix any errors. Check your credit report for free each year at www.annualcreditreport.com.
9. Get Identity Theft Insurance and Monitoring
According to the Federal Trade Commission, identity theft has been the number one consumer complaint for the past 15 consecutive years. For anywhere between $25 and $60 per year, you can secure identity insurance to provide reimbursement for the cost of restoring your identity and repairing credit reports. Identity theft monitoring is designed to help you learn about any fraudulent activity as early as possible and get help repairing your credit if your identity is stolen.
10. Plan Some Splurges and Reward Yourself
The potential attainment of a reward helps motivate you to work harder toward your goals and stay on track. Early in the year, plan a few milestone rewards to keep you motivated. One way is to schedule three small rewards at the end of the first, second, and third quarters, and one large splurge for the end of the year. It could be as small as a nice dinner out with your spouse, or as big as a European vacation (as long as you’ve budgeted for it, of course!).
What are your financial goals for 2016? At Engaging Women in Wealth, we’d love the opportunity to serve as your workout buddy and accountability partner. From helping you set your goals to staying on track all year long, we’re here to support you along your financial journey. We encourage you to share this article with your loved ones. If they are interested in getting on the right financial foot, we are never too busy to meet with them to see how we may be able to help. Happy New Year and here’s to a wonderful 2016!
Do you have a question about something on this checklist? Contact me today at 858.756.0004 or email me at [email protected]. Want to get fit in 2016? Join us for our Engaging Women in Wealth workshops!
About Deb Sims
Deborah Sims is the Principal of Estate Management Group, a wealth management and financial services firm offering comprehensive and customized strategies to help her clients manage their assets and feel confident in their future. Her mission is to serve as her clients’ most trusted wealth advisor through professional knowledge, integrity, and personalized wealth management services. Based in San Diego, California, Deb’s team has offices in Rancho Santa Fe, Old Town, and Del Mar. She invites you to contact her team today to learn more about how they can help you.