Time for New Year's
Financial Resolutions
Once again,
it's time to make New Year's resolutions. If you can succeed in your efforts to
exercise more, travel, learn a new language or any of the other worthy goals
you might have, you can expand your horizons and enjoy a better quality of
life. But if you want to make an even bigger impact on your future, you may
want to make - and keep - financial resolutions for the coming year.
As with all resolutions, the financial
ones are easier to keep if they don't force you to drastically change your
lifestyle. So, with that in mind, here are a few attainable financial
resolutions to consider for 2007:
Increase your retirement plan
contributions. If your salary goes up this year, increase the percentage of
your earnings that you defer into your 401(k) plan (or your 403(b), if you work
for a non-profit agency, or 457(b) if you work for a state, county, city or
other governmental agency). With tax-deferred growth, pre-tax contributions and
a variety of investment choices, these plans are great retirement savings
vehicles. Plus, since the money is taken out before it even reaches your check,
you won't really "miss" your increased payments. And in 2007, the
contribution limit for these plans has increased to $15,500. (If you're 50 or
older, you can contribute an additional $5,000.)
"Max out" on your IRA. In 2007,
you can put up to $4,000 into a traditional or Roth IRA, or $5,000 if you are
50 or older. If you cannot come up with the maximum amount at once, try
dividing your IRA contributions into 12 equal monthly payments and have the
money taken automatically from a checking or savings account.
Build adequate cash reserves. Try to
build a sufficient cash cushion - about six to 12 months' worth of living
expenses - to handle any unexpected financial needs, such as a major car repair
or an expensive new appliance. By building an emergency fund, you won't need to
tap into your investments. And by giving your investments the potential to grow
as long as possible, you'll accelerate your chances for progress toward your
long-term financial goals.
Review your investment portfolio. It's a
good idea to review your investment portfolio at least once a year. Over the
course of 12 months, your life can change in many ways, e.g., new spouse, new
house, new child, new job, etc. And if your life changes significantly, your
investment goals may also change. But even if your circumstances haven't
changed much in a year, you should review your holdings to make sure your
investment mix reflects your individual risk tolerance, time horizon and
long-term objectives. A financial professional can help you review your investments
to make sure you are still on track.
Don't take a "time out" from
investing. In every year, you can find any number of events - war, political
turmoil, natural disasters, market volatility, etc. - that might motivate you
to "take a break" from investing. But the most successful investors
keep on investing, no matter how gloomy the news may be. So, in 2007, look
beyond the headlines. Instead, focus on quality investments and your long-term
investment strategies.
If you can achieve these New Year's resolutions, you'll go a long way toward potentially improving your financial situation in 2007 - and beyond.