The start to a new year is a great time to create new healthy habits and behavior with your money. Some of you may have already resolved to put more away in savings, invest in a retirement plan, pay off debts, or stick to a budget that fits within your income. Others may not know exactly how you want to improve your finances, but you want to make changes that will positively impact your relationship with money.
Regardless of how solidified your resolutions are, these eight tips from financial planners will help you kick off a more financially mindful 2016.
1. Stop, Look, and Listen: Be intentional with your finances, advises Carlos Colon, AFC, a Financial Education Program Manager at mpowered. “If you don’t have a plan for your money, someone else does. That’s what marketing is all about: teams of professional strategists work deliberately to devise plans for your money.” This kind of wakes you up, doesn’t it?
2. Everyone Deserves an Advisor: Don’t assume that you don’t have enough money to benefit from a financial advisor, says Sara Gardner, CFP® of Elevated Planning, LLC. “You don’t have to be part of the one percent or have $1 million to have an advisor. In fact, there are more and more advisors offering [services for] hourly fees [ranging from] $120 to $300 to get you started on your financial plan.” she says. To find an advisor near you, search the Certified Financial Planner Board (CFPB) or the Financial Planning Association (FPA) databases.
3. Consider Your Survivors: Communicate to your family a plan for your assets and debts if you pass away, advises Wendi Strom, CFP® of Renaissance Wealth Management. “Don’t get so busy saving and planning for retirement that you forget making a plan to protect your survivors. Although it’s not an easy topic to think about, there will be one day when our loved ones will no longer have us around. If it were to happen unexpectedly, would yours know where to go to find out what you owe and what you own?”
4. Push Money, Don’t Pull: I tell my clients who set up automatic payments to make sure they retain control of their financial information. In other words, authorize payments through your bank, not by giving other companies access to your bank account information. It’s tempting to set up autopay with all sorts of expenses, including health insurance and everyday bills, but if the company makes a mistake and pulls too much money from your account, or you terminate a contract, it’s up to you to recover your funds. The one exception to this rule is with your mortgage, because you absolutely have to pay that for an extended period of time.
5. Watch Out for “Lifestyle Creep": Don’t make lifestyle changes that bring your standard of living beyond your income, says Rebecca Kennedy, CFP® of Kennedy Financial Planning. “As careers progress and income rises over time, people naturally spend more money. However, what you get accustomed to spending—i.e., your standard of living—is the biggest determining factor in how much you need to have saved for retirement. As your income grows, increase your level of savings proportionately. It will serve the dual purpose of building your long-term nest egg and keeping your spending in check.”
6. Control Your Emotions: Make financial decisions based on facts, not emotions, says Scott Arnold, CFP® of G & S Capital. “Human emotions—fear and greed—are the worst enemies to success in a portfolio.” The key to controlling our emotions is to have a specific plan in place before the market melts-up…or melts-down.
7. “Maxing Out” Isn’t Always Enough: Just because you are contributing the maximum amount of money to your retirement account that IRS guidelines allow doesn’t mean you are contributing enough, says Julie Fletcher, CFP® at Sharkey Howes & Javer. “The retirement plan contribution limits are set by IRS guidelines and reviewed each year. However, the IRS is not a personal financial advisor and does not know how much you need to be saving to meet your financial goals.”
8. You Are Your Greatest Investment: The performance of your investments can’t always be measured financially, says Matt Chope, CFP® and partner at The Center for Financial Planning. “People expect and understand what is called a ‘return on investment:’ what you make on your money. However, investing in others is one of the most important investments we can make. It might be a doctor, a therapist, a trainer, or a nutritionist. What could be more important than investing in the relationship to manage your health—the quintessential asset of your life? Also, if financial management lies outside of your area of interest, you should hire a specialist, aka a CFP® professional. Financial planners help clients have a clear understanding of their life goals and the progress they have made toward achieving those goals.” For most, time is even more precious than money, and we can’t make it—we can only spend it! After work, exercising, and all of our various commitments, there is very little time left. So delegation to a specialist has the added benefit of leveraging precious time.
If you need customized advice on how to improve your finances in 2016, I recommend that you consult with a Certified Financial Planner Professional™. Together, you can create a plan that will get you on track to reach your financial goals.
Addie McHale is a member of the DailyWorth Connect Program. Read more about the program here.