Written By: Melinda J. Perez
January brings with it a burst of energy, inspiring people to pursue their goals with a renewed drive for the year ahead. And with that in mind, we set resolutions to make our bodies healthier, or to nurture our relationships, or to gain skills that will advance our careers.
Of course, there are many more goals people set; but too often, they forget to include resolutions to improve their financial outlook. When the fact is: Whatever you wish to see improve this year, your finances will play a part in how successful you will be.
With this is in mind, here are five financial resolutions to consider adding to your list for 2018:
1. Pay Off Your Debt
Before you can move forward, you’ll need to look back and see where you’re coming from. This is the time to recover from holiday spending and evaluate your current situation.
How did your December budget fare? Did you stick to it? If not, how long will it take for you to get back on track?
Compile a list of your outstanding debts, and look at interest rates and payment options. Create a budget that will allow you to pay down your debt. It may be that you can instantly see that cutting out coffee trips and subscription boxes will help, or you may need to make larger adjustments—which is something a financial planner can help you with.
Once you’ve prioritized eliminating debt, the next question to consider is: How much can you save?
Growing up my mother taught me to save 10% for emergencies. However, goal-oriented people are more likely to save for something (as opposed to putting money aside for a worst-case scenario that may never happen). In other words, you don’t really want to plan for an emergency. But I bet you’d save for an upcoming trip more enthusiastically.
So, save for both. Have an emergency fund in case you need that mechanical work and your warranty just expired (or in case your heater goes out and it’s actually cold in Texas). And, save for that trip, new car, or down payment too.
There’s no need to be intimidated by the prospect of investing. You can start small: No on one says you need to have be wealthy before you invest—compound interest can help you get there.
As Ed Hart, one of our advisors here at Sendero once said, “Millionaires got to be millionaires by taking a risk at some point in their lives.” Do some research and see what you feel most comfortable with. Let 2018 be the year you take that first step toward investing.
4. Plan for Retirement
Whether you’re in your twenties, forties, or seventies, you should be thinking about saving for retirement. Are you financially prepared to be able to travel the world or whatever your personal dream may be? Ask yourself the following questions:
1. Are you putting away the most you can?
2. Are you participating in your employer’s retirement plan? (Most employers match participation up to a certain percentage, so be sure to take advantage of this free money during open enrollment!) Contributing to your 401k can also reduce your taxable income.
3. If you’re self-employed, are you setting yourself up for a successful retirement?
It’s never too late to bolster your retirement savings, so if you’ve procrastinated this issue, resolve to give it the time—and money—it deserves this year. (And if you don’t the difference between a traditional and Roth IRA, reach out to an expert who does.)
5. Think About Your Legacy
Estate planning is like budgeting: Everyone knows it’s highly recommended, however many people continuously put it off.
To be clear: This financial resolution is just as important as saving. Estate planning will not only give you peace of mind, but help your loved ones as well.
If you have small children, who would take care of them? What about power of attorney: Have you given a trusted person the power to abide by your will and enforce your wishes in the event you cannot?
Make this the year you create or update your will. Visit an attorney to discuss the various estate planning options available and find one that fits your needs.
Much like other resolutions, change will not happen overnight. But the sooner you take steps in the right direction, the sooner you’ll be on the path to change. Tackle the goals above one at a time, and don’t be afraid to ask for help along the way. Reach out to your advisors, CPAs, financial planners and attorneys to make sure your 2018 financial resolutions are met this year.