It’s the time of year when many of us make New Year’s resolutions. We may resolve to get to the gym more frequently, spend more time with friends and family, or be more charitably inclined. Perhaps, something else to think about is resolving to focus more on our financial health in the coming year. If so, here are some ideas to consider:
- Update your balance sheet and financial plan. A new year is always a good time to update your personal balance sheet and to revisit your overall financial plan. A sound up-to-date financial plan is critical in determining whether your investment portfolio is allocated in a way that best meets your goals and best matches your tolerance for risk.
- Revisit your savings and debt reduction goals. As part of updating your financial plan, take the time to think about your goals. Are you able to increase your savings this coming year? Should you more aggressively pay down debt? Review your budget. Is it still reasonable or should you revise it? If you don’t have a budget, consider creating one.
- Review your company retirement plan elections. If you are participating in your company’s retirement plan, now is a good time to review how much you’re contributing, whether you’re taking advantage of your employer’s matching contribution (if there is one), whether you’ve elected pre-tax (Traditional) or after-tax (Roth) contributions, and how your retirement plan investments are allocated.
- Consider your insurance needs. As we move through our careers or as different life events occur, insurance needs change. For many people, the end of the year is insurance renewal time – especially if you have insurance benefits through your employer. Think about what has changed or may change in 2017 and what if any impact those changes may have on your health insurance, life insurance, and disability insurance. Do you have adequate life and disability insurance coverage? Is your life insurance the right type (term versus permanent)? What kind of disability insurance do you have (own-occupation versus any-occupation) and is it sufficient given your income? Is long-term care insurance a consideration?
- Think about your asset allocation. The beginning of each year is an excellent time to review the overall stock and bond mix in your portfolio. The most effective way to manage risk and return is through your overall stock/bond allocation. If anything has changed in your personal situation, it may warrant a change in your portfolio asset allocation.
Unfortunately, most New Year’s resolutions are broken within a few weeks of the new year. Hopefully, that won’t be the case with these financial New Year’s resolutions as they are certainly worth keeping for 2017 and the years to follow.
Matthew S. Reznik, CPA, MBA, CFP®, CFA is a Wealth Manager at BDF. As a member of the Investment Committee, he is instrumental in developing BDF’s overall investment strategy. Matt also enjoys writing and is responsible for much of BDF’s client correspondence. Matt received his Bachelor of Science in Economics with concentrations in accounting and finance from the Wharton School of the University of Pennsylvania and his MBA in finance and strategic management from the University of Chicago Booth School of Business. He is a member of the American Institute of Certified Public Accountants, the CFA Institute, and the CFA Society of Chicago.