Financial Resolutions

Financial Resolutions

7 March, 2004

By this time of year, most people have broken their new year's resolutions. However, it’s not too late to make a pledge to improve your personal financial position yet this year. Here are a few suggestions:

Review your Will and estate plan.

Tax law changes in the last few years have outdated many estate plans. Even smaller estates can take advantage of the step up in basis rules to significantly reduce their heir's future taxable income or make use of trusts to safeguard family assets. If you don’t have a professionally drafted Will, you may be doing a real disservice to your family.

Eliminate consumer debt.

Cut out credit cards or pay the outstanding balance each month to avoid the high interest charges. If you cannot eliminate the debt, replace it with lower cost debt like a home equity loan. While you cannot deduct interest paid on a credit card, you will be able to deduct the home equity loan interest as an itemized deduction on your tax return.

Improve your recordkeeping.

Keep separate files for investments, insurance policies, Will and estate documents, tax deductions and your home. If you have a computer, purchase one of the personal financial management software programs to help keep your financial information organized and current. Keeping your personal affairs organized will allow you to pay more attention to them and make better, timelier decisions.

Establish a savings plan.

Begin a savings reserve to cover unexpected expenses and provide funds for new opportunities. A rule of thumb is that you should have enough in liquid reserve to provide for six months worth of living expenses. Then if opportunity knocks, you'll be able to take advantage of it. Or, should a misfortune occur, you'll be better prepared to handle it.

Re-assess your insurance needs.

Meet with both your financial advisor and your insurance agent to determine if you are over-insured in some areas or under-insured in others. Since most financial advisors don't sell insurance, they can provide an independent view.

Investigate before you invest.

Develop an investment plan and stick with it. Resolve never to buy "penny stocks" or any investment product sold over the telephone or internet. To get the most from your investments, it is strongly recommended that you use a professional investment advisor.

Plan for Retirement.

The earlier you plan, the less financial pain you will experience in the future. Take full advantage of retirement plans offered by your employer, especially where the employer matches a portion of your contributions to the plan. 
 Review your social security earnings record.

The Social Security Administration now automatically mails you a summary of your earnings report. Take time to review it and make sure it is accurate. Your future benefits will be based on this information, and you only have three years to correct any errors.

It’s not too late to get started with your “rest of the year” resolutions.