Six Financial Resolutions For 2016

The Means Report: 6 Financial Resolutions Graphic
The Means Report: 6 Financial Resolutions Graphic
The Means Report: 6 Financial Resolutions Graphic
The Means Report: 6 Financial Resolutions Graphic

One of the top resolutions people make every year is to do better with their finances. That is why we asked Will Caywood to take the time this month to go over steps you can take to become better financially aware. He breaks it all down into 6 financial resolutions you should be making.

  1. Get your balance sheet in order and review your budget and spending habits
    -You can’t realistically expect to reach a goal without knowing where you’re starting from. Using an effective date of 12/31, update your balance sheet-basically your assets versus your debts. This will help you realize where you need to focus your attention in the coming year. Maybe you need to pay down some debt or maybe you need to put some extra money towards savings. You have to have a scorecard or a snapshot of how you stand financially so that you can make a plan to reach your goals
    -The beginning of the year is a great time to look back at the previous year and forward to the upcoming year, especially when it comes to spending. Having a written budget each month and each year is a great way to keep track spending and also a time to differentiate your needs from your wants. By having a monthly budget, it’s like having a series of mini goals on the way to your ultimate financial goal. It helps you get to your goal quicker since you know where each dollar will be spent before you actually receive it. Only about 40% of adults have a budget according to a recent study, so it’s not surprising that Americans racked up $68 billion of credit card debt in 2015.
  1. Get out of debt
    -This is one of the top resolutions for many people each year. It’s especially timely at the beginning of the year because so many people are getting their bills for all of the gifts and fun that they had during the holiday season. Businesses are making it easier and easier to spend money with them whether it’s the computer or on your phone or over the phone-they’ve become very good at accepting money for their goods and services. Budgeting and self control will help with the overspending going forward, but you still have to do something about the debt that you’ve incurred. The combination of a zero or low balance transfer credit card, a financial advisor, and a credit card calculator can help immensely. The amount of money you spend on finance charges and interest payments can be cut down significantly if you shorten the length of time it takes for you to pay them off. There are different strategies for how to tackle the debt, but the biggest key is to have a strategy and stick to it.
  1.  Review the titling of your accounts and update your beneficiaries
    -Having the proper titling of your accounts seems pretty straightforward, but it’s something that is often overlooked. Sometimes it’s as easy as adding your new spouse to an investment or bank account, but it’s not always that simple. The titling of your accounts has implications across a wide range of estate planning issues as well as other situations such as Medicaid eligibility, special needs qualifications, and even borrowing power. It’s important to review the titling of your accounts periodically to make sure it’s the arrangement that you still want.
    -Updating your beneficiaries is vitally important so that who receives your assets is determined by your wishes and not determined by federal or state law. Changing beneficiaries should be considered when there is a divorce, remarriage, birth, or death in the family, just to name a few. Anything that affects your heirs such as wills, life insurance, annuities, IRA’s, 401k’s, pensions, etc. should have their beneficiaries reviewed and updated periodically.
  1. Evaluate your cash holdings and Revisit your portfolio’s asset allocation
    -Everyone has a different level of comfort as far as how much money should be set aside in cash accounts that can be accessed quickly and easily. A general rule of thumb is to have at least 3 to 6 months of living expenses in these types of accounts.
    -From an asset allocation standpoint, the amount you have invested in stocks versus bonds versus cash changes on a day to day basis due to market volatility. Over the course of a year or two, your initial allocation changes with market volatility. The beginning of the year is a good time to review this. Your risk tolerance changes over time as you get older, your net worth grows, your income changes, and even with changes in the markets. It’s vitally important to have a proper asset allocation so that you are invested appropriately for your individual needs.
  1. Evaluate your sources of retirement income including your Social Security Statement
    -Most retirees have several sources of income such as Social Security, pensions, retirement or investment accounts, real estate, etc. and each person’s situation is unique. The beginning of the year is a great time to think about how secure each one of these sources is. Pensions and Social Security are generally the most secure with real estate and investments being more unpredictable. If too much of your retirement income is from sources that you consider less than solid, it may be time to re-position your assets.
    -If you’re not yet retired, it’s a good idea to go online and establish an account with the Social Security Administration. They no longer mail out an individual statement of accrued benefits, but all of the information is available online. It’s important to review your statement and make sure that the income matches what you’ve earned over the years. You can also plug in different retirement ages to see what your income will look like if you retire at different times.
  1. Check to see if your retirement plan is on track
    -A successful retirement from a financial standpoint is about cash flow. We recommend that you don’t become fixated on a number or a dollar figure for your account value, but rather what your cash flow situation is or will be. With the volatility that we had in the stock market in the past year or so and especially to start 2016, it’s an excellent time to review your retirement plan. I’ve found that the people that worry the most about the market and their retirement plans are the ones the worry the least and the ones the worry the least are the ones that should be monitoring it a little closer. This is something that we do for our clients on a daily basis and clients value the clarity that is provided for their financial future.

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