When it comes to New Year’s Resolutions, there seems to be
two types of people: those who look forward to making (and
sometimes breaking) them, and those who think the whole
thing is probably a waste of time. Everyone knows that many
popular resolutions are broken by the time Valentine’s Day
comes around, just look at the gym in January versus February
or March!
However, I would argue that financial resolutions should
be seriously considered for everyone. Getting started on
financial resolutions at any time, New Years or not, can help
bring peace of mind to both working and retired people when
tackled in a few easy steps.
For many, this may not be a challenge as you may already
be a spreadsheet wizard or use an aggregator (i.e., MINT or
Personal Capital) to regularly look at your balance sheet. For
those who are new to the process, I would start by listing your
assets including: home, investment accounts, bank accounts,
loans, credit card balances, cash value of life insurance
policies, 401k/403b, automobiles, home furnishings, vacation
home or rentals. By subtracting debt from your assets, you
end up with your total net worth.
The resolutions you should make may become clearer by
regularly completing this exercise, as you look closely at your
assets and liabilities, patterns may emerge. If you have low
interest savings accounts and high interest debt, for example,
a pay off strategy could be a top priority. Or, if your savings
are not where they need to be, is there a way to save more?
Volatility always creates opportunities, as the winners of last
year are often the losers of today. Rebalancing your portfolio
to your target allocation (such as 60% stocks, 40% bonds)
will enable you to buy low and sell high, a proven long-term
strategy for success. An annual rebalancing is preferable to a
more frequent one, as studies show that rebalancing too often
can increase taxes or fees and inhibit performance.
Identity theft is running rampant, so checking your credit
report is more important than ever. You are entitled to three
free credit reports per year, in addition, many banks offer
credit reporting that is free, and daily. There are also paid
services that can help reduce the risk of someone opening
accounts in your name or getting ahold of passwords or other
personal data.
If your credit score looks good and you can verify all the
accounts as yours, then there is not much more to do than
continue to monitor the data. If there are issues, however,
take steps to improve your credit rating as it would adversely
impact your ability to borrow by forcing you to get credit at a
higher interest rate, or not be able to get it when you need it.
Insurance is a critical part of risk management and yet is an
often overlooked area of personal financial planning. At least
annually, you should review all your coverage, including your
Property and Casualty (homeowners, auto and umbrella), as
well as your life insurance coverage.
When setting the budget for the year, a good method is to first
establish the minimum required for living expenses. If your
spending often exceeds your income, you may need to cut
back on some of the more enjoyable things, such as vacation,
concerts, sporting events, etc.
Be sure to budget not just for spending, but also for saving
to ensure you have a comfortable emergency fund, as well
as longer term investments for retirement or legacy needs/
wants.
The New Year is an excellent time to take a close look at
your overall financial picture and take the necessary steps to
rechart your course, if there are improvements to be made.
If not, the peace of mind from knowing you are fiscally sound
can put you in a positive frame of mind as you enter another
year. As always, our team at CNB Wealth Management is ready
to help you with any of your financial needs, so give us a call,
we would love to help.
This material is provided for general information purposes only. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.