Let me start out by wishing you a Happy New Year! There’s no better time to think about your financial resolutions for the coming year than January. This gives you the full twelve months to pursue these objectives.
401(k) Plan. I’ve said it before and I’ll say it again, fully funding your 401(k), 403(b) or 457 plan is my top financial recommendation for the new year. And why wouldn’t it be? It’s a tax-deferred investment which decreases your income and therefore decreases the taxes that you owe. Also, many employers match your contribution, so not investing up to their maximum match just leaves money on the table. In 2020, the contribution limit increases from $19,000 to $19,500 per person. Additionally, the catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
IRA Plans. The limit on annual contributions to an IRA remains unchanged at $6,000. The catch-up contribution limit for individuals aged 50 and over remains at $1,000. For many of us, this is another good way to reduce our taxes and increase our retirement savings.
Unused Services. What better way to increase your income than to not spend money on things you really don’t use. Start out the new year by inventorying the services you’ve signed up for – especially those that are on automatic payments. You can learn more about this by reading A Hidden Expense: Subscription Services.
Planning for the Loss of Your Spouse. Since we don’t know when our spouse might die or become incapacitated, I strongly recommend that people prepare for this now rather than later. Check out Financial Preparation for the Loss of a Spouse to get some ideas on this.
Reduce Credit Card Debt. You may know that credit card debt carries one of the highest interest rates of any type of loan. So, a great resolution is to really try to eliminate your credit card debt this year. A previous article, Another Reason to Eliminate Credit Card Debt, will give you some ideas on this.
Save for College. Sure, the kids are still little, but college is expensive and it’s so helpful to start saving as early as you can. You can get some ideas on this by reading Saving for College.
Review Insurance. It’s a great idea to review your insurance coverage to be sure you’re properly protected. Is your total life insurance adequate? Does your home owners insurance cover the current (appreciated) value? Should you look into some type of long term care protection?
Portfolio Diversification. It’s important to check your portfolio diversification at least annually. It is likely that some sectors grew more last year than others and your target investment profile may be off. This can increase your investment risk as you’ll be too susceptible to market changes.
Rainy Day & Emergency Funds. These are the very liquid investments you need to cover future surprise expenses. While you don’t know exactly what they will be, you are pretty certain that they will occur. Check out this article for some tips on setting up this important investment.
Review Your Budget. Hopefully you’re using some form of budgeting to manage your expenses. January is a terrific time to see how you deviated from last year’s budget and to adjust your goals for the coming year.
I hope that this list of financial resolutions has given you some ideas for your 2020 goals. If you’d like some additional help with any financial questions that you may have, please visit our website or give us a call at 970.419.8212 so that we can discuss your situation in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.