Provided by Benjamin F. Edwards & Co. and Clifford E. Bryan
Among the various New Year’s resolutions people make each year, many set goals to be smarter about their money. To that end, we’ll discuss several ideas here to get you started on that path. But first, you’ll want to make sure you have the right attitude about it and that you are prepared to possibly make changes regarding some of your spending and/or saving habits.
It’s easy to think of resolutions as acknowledging a lot of “shoulds” in our lives: many of us feel we “should” eat better, we should exercise more, we should stop smoking, etc. You’re less likely to make resolutions chastising yourself for past misdeeds, but rather focus more on the positive aspects of reaching some goals. For example, picture the satisfaction of being able to enjoy a nice vacation, because you’ve saved enough to be able to afford it. Money should be seen as a tool to help you enjoy your life – not a cause of guilt and worry.
At the same time, you need to be patient with yourself. If you have several areas that need addressing, you may not be able to concentrate on all of them at once – you may not get to all of them this year, or even next year. But as you find success in one area, you can move on to tackle others, and over the course of a few years you can make dramatic changes.
Not all of these suggestions may apply to you specifically, but here are a few ideas to get you started with your resolution planning. And they might be applicable to a friend or relative, so pass them along:
Get out of debt: If you’ve compiled a lot of credit-card bills, you’ll want to move quickly to pay them off. Think of it this way: those holiday presents were expensive enough. Don’t make them even more costly by adding on the high interest rates credit cards typically charge.
Build an emergency fund: We hope 2020 will be a great year for you, but it’s best to be prepared for whatever bumps may come your way. The general rule of thumb is to have enough saved so you can keep going without problems during times of financial difficulty. That typically translates into having the equivalent of three to six months’ worth of your income saved away somewhere you can easily access it.
Save, save, save: The Internal Revenue Service encourages you and your employer to save with various programs that give tax breaks. The traditional IRA and 401(K) plans from your employer both give you ways of saving for retirement and lowering your tax bill in the process. The same goes for saving for things like your child’s education, or even healthcare expenses. We won’t go into detail here about all the various options, but in general, it’s best.
to prioritize your savings by focusing first on ways that help lower your taxes, now or in the future. Once you’ve capped out the limits on all those methods – as well as the emergency fund – you can look to save in other ways, assuming you don’t need the money immediately.
Rebalance your portfolio: Stocks have had gains over the past year, so it’s possible they’ve come to represent a larger component of your portfolio, especially if you haven’t rebalanced over the past several months. Of course, moving your investments away from stocks you currently own to other investments means you could potentially miss out on more growth. But you can also take advantage of some of the gains you’ve realized by selling some of the appreciated assets. And if the market takes a turn, you won’t be hurt as much.
With all of these ideas, you would likely benefit from talking to a financial consultant about addressing your plans for 2020. A trusted advisor can provide you the knowledge to assess these potentially complicated topics, and can help keep you on track as you strive to make your resolutions a reality.
This article is provided by Clifford E. Bryan, a financial consultant at Benjamin F. Edwards & Co. in Chesterton, IN and was prepared by or in cooperation with Benjamin F. Edwards & Co. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. Benjamin F. Edwards & Co. does not endorse this organization or publication. Consult your investment professional for additional information and guidance. Benjamin F. Edwards does not provide tax or legal advice.
Benjamin F. Edwards & Co., Member SIPC and FINRA