Well, we’re one month into 2017. If you haven’t made any financial resolutions yet, now is a great time to review your financial scorecard for last year and then look for ways to improve in 2017. Here are some financial goals you could take in to consideration this year.
Calculate Your Net Worth
If you haven’t done so already, The New Year is as good a time as any for determining what you’re worth (financially, of course). Calculating your net worth is a key step in assessing your financial health and reaching your financial goals. Looking closely at all your assets and liabilities helps create a clear picture of where you are prioritizing your current spending and saving and where you need to make changes in your spending and saving habits.
It’s a good idea to recalculate your net worth each year to keep on top of your progress towards your financial goals and correct any mistakes you’re making before they create overwhelming debts. The resolutions you need to make will become more obvious after making this calculation.
Reset Your Retirement Savings
At work, you probably have the opportunity to save for your retirement through a 401(k), 403(b) or 457 plan sponsored by your employer. If so, consider that most people find it easier to max out their retirement contributions by budgeting to contribute a set amount each month.
Employer Plans: If you have access to a 401(k), 403(b) or 457 plan at work, consider instructing your employer to withhold enough through salary deferrals to ensure that you reach the maximum limit each year. If you’ll be 50 or older by December 31, bump up that amount to account for the additional catch-up contributions you’re allowed to make. If you are paid on some other frequency, such as weekly or bi-weekly, simply divide the contribution limit by the number of your pay periods for the year. Of course, you should save only amounts that you can realistically afford, as contributing more than you can afford may result in having to incur debts to cover everyday expenses. To determine how much you can save each period, incorporate your retirement savings into your regular budget.
Self-employment Plans: If you are self-employed, depending on your income, you can contribute to a SEP IRA, profit-sharing plan, or independent 401(k) plan.
IRAs. Even if you’re covered under a retirement plan at work, you and your spouse can each contribute to a Traditional IRA or Roth IRA, as long as you’re combined taxable wages and net self-employment income is not less than the total amount contributed. Anyone 50 or older can contribute an extra $1,000, increasing the total allowable contribution to $6,500, or $541.66 per month. Keep in mind, however, that a modified adjusted gross income of $60,000 to $70,000 ($95,000 to $115,000 for married couples filing jointly) puts you in the phase-out range for deducting your IRA contributions.
Update Your Savings and Debt Reduction Goals
Creating easy access to your funds can be quite tempting, and if you are like most people, you will spend money that you can easily attain. Therefore, to help you reach your goal, be sure to transfer amounts earmarked for savings from your checking account to a separate savings or investment account that is not easily accessed, making it less tempting for you to spend the money that you have managed to save.
Take a few minutes now to set new savings goals for 2017, including how much you would like to add to your retirement nest egg, your children’s education fund or the down payment on your home. You should also reset how much you plan to pay on your personal loans, debts and home mortgage accounts. And don’t forget about paying some extra principal toward your mortgage payment each month. By doing so, you’ll earn a risk-free return on that money equal to your mortgage interest rate. Plus, you’ll cut down on the number of years it will take to pay off your mortgage. However, if you must choose between adding to your retirement nest egg and paying extra on your mortgage, talk to your financial advisor to determine which option is more suitable for you.
Rebalance Your Investment Portfolio: The previous year was no different from any other year: some sectors over-performed and some sectors under-performed. Chances are that the sectors that did the best last year may not enjoy a repeat performance this year. By rebalancing your portfolio to its original or updated asset allocation, you take steps to lock in gains from the sectors with the best returns and purchase shares in the sectors that have lagged behind last year’s leaders.
Pay Down Your Credit Cards: If you owe money on your credit cards, determine how much you can realistically afford to pay off during the year. For best results, try not to charge additional purchases on those cards while you’re trying to pay down what you owe. If you have high-interest credit card balances, consider whether it would be more beneficial to pay off those high-interest debts or to add to your savings.
Review Your Credit Report: Review your credit report, and take steps to repair any negative aspects. Now that you’re entitled to three free credit reports each year, there is no excuse for not reviewing your most important financial reports, especially since errors in these reports are not uncommon. That said, obtaining a truly free credit report isn’t as easy as some companies claim, so be sure you know all the terms and conditions before requesting a report. A poor credit report could adversely affect the amount you are able to save, as it could result in you paying higher interest rates on loans, which reduces your disposable income.
Review Your Life Insurance and Disability Insurance Needs: As you move through your career, your life and disability insurance needs to continue to change. Give some thought as to how much protection you need and compare it to the coverage you currently have through your employer’s benefit package. Consider whether you need more or less life insurance, and whether your needs would be better satisfied by term or permanent life insurance. Also, review your disability insurance coverage to determine whether you have enough coverage.
The Bottom Line
Be cautious about setting too many or unrealistic financial goals. Otherwise, you may be unable to accomplish any of them. Take this opportunity to restate your financial resolutions simply and clearly for the New Year. It may be a good idea to maintain a checklist to keep track of how you are doing throughout the year, so that you can make any necessary modifications.
Good luck achieving your 2017 financial goals! If you have any questions on how to best achieve your resolutions or on other financial matters, we’d enjoy getting together. Please visit our website or give us a call at 970.419.8212 so that we can set up some time for a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.