Resolutions to Keep You Financially Fit
It's a new year and a fresh opportunity to get your financial affairs in order. Take some time to reflect on how you're doing financially with these tips:
• Track your spending – a piece of paper, pencil and a calculator will help you determine where your money goes each month. If you're like many Americans who are outspending their incomes, you'll need to find a way to cut back to control debt and make sure your spending plan allows for investing to build your net worth.
• Know your net worth – list your assets, subtract your debts and what remains is your net worth. Set a goal to have your net worth next year exceed this year's number.
• Build an emergency fund – a common rule of thumb is to have three to six months' worth of living expenses available as cash in your emergency fund.
• Rebalance your portfolio – concentrating too much of your wealth in one investment increases the risk of your portfolio. For example, if your targeted breakdown between stocks, bonds and cash is 50/40/10 and you have 70 percent of your money in stocks, then selling off part of your stock portfolio to get back to your target allocation rebalances your portfolio.
• Estimate your retirement needs – take your current income needs and subtract what you expect to receive in Social Security and pension benefits in today's dollars; your annual Social Security/pension statements can help with this task. Review your total annual expenses — experts say you should plan on at least 75% of these annual expenses in retirement. If you come up short, now is the time to increase your 401(k) or IRA contributions.
• File all crucial documents – keep a list of your credit union accounts, brokerage accounts, retirement accounts, pension rights, insurance policies, etc., along with a note letting heirs know where to find an executed copy of your will.
• Review your credit reports – order a free copy every year from each of the three major credit bureaus. Visit www.annualcreditreport.com or call 1-877-322-8228. Immediately notify the credit bureau(s) in writing if you find inaccurate information.
• Reduce your risk of identity theft by calling 1-888-5-OPTOUT or visit www.optoutprescreen.com to stop getting those credit card offers in the mail.
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