If you’re wondering about where you’re headed financially, the start of a new year is a great time to effectively plan your trip. Even if you think you’ve got things mapped out, it’s always a good idea to apply the brakes and check to make sure you’re still headed in the right direction.
The following tips can help you navigate your financial journey:
Set Your Goals
Identify and write down your financial goals. Be specific! Then, break each financial goal into several parts: short-term (less than 1 year), medium-term (1-3 years), and long-term (5+ years). This will help you manage your objectives and prevent you from becoming overwhelmed if you encounter obstacles in the road.
Evaluate Your Life Changes
What has happened in the last year and what do you anticipate happening in the next year? Marriage? Baby? Different job? New home? Or retirement? You may need to modify your budget, spending, savings, or investments to accommodate life’s bigger events. Being prepared for these events, as much as is possible, can make “changing lanes” go smoother.
Check Your Credit
With identity theft on the rise, you should check your credit at least once a year to ensure its accuracy. You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Visit annualcreditreport.com to find out more. And, if you see something wrong, take steps to have it corrected immediately!
Think about Your Debt Burden
Is it manageable? If your credit card debt has grown since last year, or you’re making only the minimum payment or are late with payments, you most likely are living beyond your means. Make paying off that debt the first stop on your journey!
Review (or Establish) Your Retirement Goals
Think about where you want to live in retirement and how you want to spend your time. If you have a 401(k) plan through your employer, review it and evaluate the investments to ensure they are performing appropriately for your age and retirement strategy. And try to plan for the unexpected, too, like the cost of home health care, an assisted living facility, or a nursing home.
Protect Your Assets
Your greatest asset is your income earning ability. Do you have long-term disability insurance? Also, review your homeowner’s or renter’s, health, and car insurance to ensure you have enough coverage. Do others depend on you? If so, life insurance is very important. If you already have life insurance, be sure you have enough, and that the beneficiary information is correct.
Prepare for the Unexpected
Do you have an emergency fund? It’s suggested that you save three to six months’ worth of living expenses in stable, low-risk accounts where money is easily accessible without excessive penalties.
If you don’t have an emergency fund, start one with a goal you can live with, a small percentage (3-5%) of your paycheck. Consider paying yourself first by saving through automatic payroll deduction so you’re not tempted to spend this money elsewhere.
While you may find it easier to put off thinking about your financial health until sometime down the road, the earlier you begin managing your finances, the more secure your future can be. A financial roadmap, reviewed and updated at regular intervals, will help ensure a safe, exciting journey with the time and resources to enjoy every minute.
This article is for informational purposes only, you should not construe any information provided as legal, tax, investment, or financial advice. No reader should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.