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27 Financial New Year's Resolutions To Build Wealth

By alagbe003 (M)December 31, 2016, 08:37:07 PM
Rob Berger ,   CONTRIBUTOR

I write about building wealth and achieving financial freedom. 

Opinions expressed by Forbes Contributors are their own.
This time of year is ideal for reflection. It's not just the start of a new year when New Year's resolutions are made. Many people take time off of work and, after the hustle and bustle of the holidays, have some time to think.




It's during this time we remember the past and plan for the future. Many of those plans involve our finances. So I've put together a list of financial New Year's Resolutions that can help you build wealth in the new year.

Stick to a budget: Wealth is created, first, by spending less than you make. Creating and sticking to a budget can help you accomplish this important goal. Budgeting, however, doesn't require you to track every dime you earn. If you hate budgeting, try the 50-20-30 budget or the 3-category budget.

Balance your checkbook: Yes, I recognize that balancing a checkbook is a lost art. It deserves a revival. Balancing your checkbook has several benefits, including ensuring the bank didn't make any errors, and focusing you on the money you're spending. With any one of several budgeting tools, balancing a checkbook should take just a few minutes.

Balance your credit card statement: While you're at it, balance your credit card statement, too. The idea of balancing a credit card statement never occurred to me until I started tracking my business in Quickbooks. I balance my statements every month for the same reason one would balance a checkbook.

Audit your subscriptions: Subscription services have exploded over the last few years. From Netflix to Hulu, Microsoft 360 to Apple Music, these sneaky charges add up over time. And if we aren't balancing our credit card statement each month , these small charges can go unnoticed. Review your financial statements at least once a year and get rid of the subscription services you're not using.

Refinance your mortgage: With rates apparently on the way up, now is the time to finally do what you've been putting off. Mortgage rates are still at historic lows, and refinancing a mortgage can easily save tens of thousands of dollars over the life a mortgage.

Lower your credit card interest rates: A mortgage isn't the only debt that can be refinanced. If you are struggling with high interest credit card debt, refinancing that debt to a 0% balance transfer card has two benefits. It, of course, reduces the amount of interest you'll pay. It also can speed up the time it takes to get out of debt.

Maximize your credit card rewards: Many people use credit cards for everyday spending. They are both convenient and secure. There's no reason why you shouldn't also earn cash back while you spend.

Determine your investing costs: When people find out that I'm a personal finance writer, they often ask me about their investments. My first response, always, is to ask how much their mutual funds cost. Nearly 100% of the time they have no idea. So find out how much your 401k, IRA, or other investment choices cost. You can use Google or Morningstar, along with the ticker symbol for each investment, to easily determine the cost. The goal should be to determine the weighted average cost across all of your investments.

Aim for fees of less than 25 basis points: Once you determine your fees, seek to lower them to no more than 25 basis points (0.25%). It's easy to do with low-cost index funds. Even if you have one or two actively managed funds for certain asset classes, you can keep your cost down by using index funds for the bulk of your investments.

Fire your expensive investment advisor: If you are paying 1% or more for an investment advisor to put your money in mutual funds, think twice. Even if you want help, Vanguard offers the same service for 0.3%, and robo advisors are even cheaper. Don't worry about hurting your advisor's feelings; he or she didn't worry about taking 1% of your invested net worth year in and year out.

Double check your asset allocation: While we are talking about investments, use this time to make sure your asset allocation is aligned with your investment goals. Many believe that both the stock and bond markets are in for a rough road. It's certainly true that both trade at lofty prices. Now is the time to prepare for bad markets, not when we are in the middle of one.

Start investing now: If you skimmed over ##8-11 because you don't invest, start now. Forget the advice that you should pay off all your non-mortgage debt before investing. That can take years, even decades, for some. You simply can't afford to wait that long to invest, particularly if your employer matches your contributions to a 401k. Even if it's $25 a month, make 2017 the year you started investing.

Increase your 401k/IRA contributions: If you aren't maxing out your retirement contributions, strive to increase them this year. One strategy is to set aside 50% of each raise toward your 401k until you are able to reach the contribution limit.

Move to a high yield savings account: Even with rates so low, some banks offer significantly higher yields. The big bank where I keep my checking account pays 0.01% on a savings account. With an online bank, am able to get about 1% on a savings account. While it's still depressingly low, it's worth the hassle of opening a second account.

Consider a CD ladder: If you want to seek even a higher yield, turn to long-term certificates of deposit. To avoid the risk of an early withdrawal penalty, build a CD ladder.

Start a debt avalanche: If getting out of debt is your goal for the new year, start a debt avalanche. With this approach, you take any extra money above the minimum payments and apply it to the debt with the highest interest rate. This approach can save a considerable amount of money over the debt snowball, which applies extra money to the smallest balance debt. To see just how much you could save with this approach, check out this free calculator.

Get a will: Particularly if you have a spouse or children, a will is a must. It's an easy thing to put off, but critical for a host of reasons. Bite the bullet, call an attorney, and get it done.

Reconsider life insurance: This is another important step that's easy to put off. If somebody relies on your income to survive, you need life insurance. Stick with term life insurance as it's the cheapest, yet gets the job done.

Refinance student debt: Student debt, and getting out of student debt, has become a reality for the younger generation. There are certainly times when refinancing student loans, which requires taking on private debt, is not a good idea. But if these don't apply to you, take the time to see if you can qualify for a lower interest rate with a private student loan.

Get a certification: Many fields offer certifications that can make you more valuable to your current or future employer. They require an investment in both time and money. But if you career can benefit from a certification, begin working toward one this year.

Act like you just got fired: I've talked to people who have just lost their jobs. They are busy pulling together a resume and connecting with as many people as the can on LinkedIn. The time to do this is when your job is secure. As the saying goes, hope for the best, but prepare for the worst.

Exercise regularly: Exercise has been proven to help us in our finances. It may seem counter-intuitive, but by creating good habits with our health, the benefits spill over to our spending habits. So get healthy and wealthy at the same time.

Track your investments: If you don't know your asset allocation or investing costs, start using one of several free tools to track your investments.

Pay yourself first: Particularly for those that hate budgeting, saving first and spending second is an effective way to manage your money. The key is to actually do it. Automating your finances can help.

Gid rid of five things a day: I'm on a declutter crusade. I'm trying to get my family on board, too. My goal for next year is to get rid of five things a day. It simplifies life, helps us appreciate what we have, and causes us to think twice before buying something and bringing it home.

Automate your finances: Automating our finances has several benefits. First, it helps us save first when we automate 401k, IRA, and savings. Second, it helps us avoid missing a payment. And it simplifies our lives.

Set 3 financial goals: This list of 27 is intended to spark some ideas. Consider it a checklist for 2017. Of course, we can't do it all. So pick the three most important financial goals for the new year, and focus on those priorities.

 
http://www.forbes.com/sites/robertberger/2016/12/30/27-financial-new-years-resolutions-to-build-wealth/#666c6b2829a3


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