Ready to reshape your finances in the year ahead? Whether you’re in retirement, near retirement, or just want your financial house in order, this article is for you.
It’s nearly the new year– a time when we all make resolutions and set goals for ourselves. But if you are like most people, you might not have included any financial resolutions on your list. The good thing about this, is that it’s never too late to start thinking about your financial goals.
If you’re planning on adding financial resolutions to your NYE goals, consider adding some financial to-dos. Like improving your credit or planning to pay off your debt. Whatever the goal, it’s best practice to have a starting point in order to take action.
Here are the top five new year’s resolutions and how you can help achieve them.
Make a Realistic Budget
Money Management is something we could all improve on. We all know that credit card debt is a problem. But did you know that in the second quarter of 2022, credit card debt peaked at 887 billion US dollars?
This statistic signals the need for greater urgency on our part. In short, missed payments and credit score damage are in our future if we don’t cut back—and that requires re-thinking how we allocate our money.
The best way to make a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with true necessities such as housing, food and healthcare obviously taking the top spots. After that, you can simply cut from the bottom of your list until your take-home exceeds what you plan to spend. Finally, keep track of your monthly spending throughout the year to help ensure you’re abiding by your budget.
Add One Month’s Pay to Your Emergency Fund
Building up an emergency fund is one of the first things any financial makeover should include.
You could be like most Americans and put off building your fund until you’ve got enough to cover at least 12 to 18 months’ worth of take-home pay. But we don’t recommend waiting until then to start putting money aside—instead, chip away at it in small increments.
By the end of the year try to reach a goal of an entire month’s worth of income. At the end of the day, planning for the unplanned is never a bad idea. By taking extra time to help ensure that you have an emergency fund, having the right insurance, and having a will in place in case of a death will help protect your loved ones against the unknown.
Help Protect Loved Ones
When it comes to estate planning, it’s all about focusing on your loved ones and their future. Estate planning isn’t just for the rich and wealthy, it’s for anyone who wants to have a more secure outlook for their family. Without a plan in place it could leave your loved ones in limbo financially.
Many Iowans might feel they can wait until they become seriously ill, old or unable to decide on how to divide their assets, set up a trust or legally decide whom to leave the house to. It’s better to plan ahead and utilize a Fiduciary to help you plan for any scenario with estate planning. After all, you don’t have to be rich to do well in the stock market or real estate, both of which produce assets that you’ll want to pass on to your heirs. Even if you’re only leaving behind a home, if you don’t decide who receives the property when you pass away, you won’t have any control over what happens to it.
So this resolution not only gives you peace of mind, it will help the entire family when you’re unable to do so.
Get Informed on Financial Literacy
If you’re a U.S. citizen, you might be surprised to hear that your financial literacy levels are so low. And they’re not getting better—they’re actually getting worse.
In an earlier study, roughly 34% of Americans graded their financial know-how at a “C” or below, according to the National Foundation for Credit Counseling. As of 2021, that figure is up to 43%.
We’ve got some questions: Why do our financial literacy levels keep dropping? And why aren’t we doing anything about it?
The answer is simple: We don’t know how to talk about money. We don’t know how to teach our kids about money. We don’t know how to teach ourselves about money. And we need to start talking about it now—because if we don’t start taking control of our finances now, the next generation will be even less prepared than the last one was!
Repay 20% of Your Credit Card Debt
Credit card debt is a serious problem in America, and while credit card debt in Iowa is relatively low, those numbers are continuously increasing.
A Chicago-based TransUnion analysis of trends in the credit card industry found that Iowans had average credit card debt of $3,915 in the fourth quarter of 2010, up 2.84 percent from $3,807 in the third quarter of 2010, according to its analysis ending Dec. 31.
One way to pay off your credit card quickly is by using a 0% balance transfer credit card along with a credit card calculator app. These tools help you figure out how much money you can save by paying down your debt now instead of waiting for the minimum monthly payment, and they make it easy for you to set up an automated plan for making those payments each month until your balance is paid off.
Some people start small—like $50 or even $10—and then increase their payments as they get better at budgeting and saving their money towards other goals. But if you can afford more than this amount, the sooner you reach debt freedom, the better off your wallet will be!
Help Ensure You Have Enough Insurance for a Financial Catastrophe
There’s a long list of factors to consider on your road to retirement. And life insurance should be near the top of that list.
COVID hit Iowa very hard and it is just one of the many things that showed us how fragile and precious life is. It should also remind us of the importance of helping ensure that our loved ones are cared for if we aren’t around or able to work.
In particular, that means taking steps such as purchasing life insurance and disability insurance, in addition to making sure you have enough health insurance coverage. Hopefully your family won’t need to file any claims for a very long time, but it’s better to be prepared.
For retirees, life insurance works the same way as most term or permanent policies: If you pass away, the death benefit is meant to help replace your income and help your beneficiaries pay for your final expenses.
If you lose your employer-provided life insurance plan when you retire, then it’s important to have an individual policy in place so that your loved ones don’t have to worry about paying off any outstanding debts or other financial obligations. Whether you’re nearing retirement or you’re a recent retiree, there are a few things to consider as you shop for life insurance, including:
- The cost of the policy
- The length of the policy
- The cash value feature of a permanent policy
And remember, if you feel overwhelmed with the ins-and-outs of insurance planning, making the right choice when it comes to choosing a reliable life insurance policy is easier with the help of a trusted Fiduciary.
With the new year comes resolutions, and with those resolutions comes a renewed commitment to your financial future. At Johnson Wealth and Income Management, we want you to have the best year yet—and that starts with planning for your financial resolutions.
We know that making a plan can be overwhelming at first, but it doesn’t have to be. That’s why we’re here: to help you get back on track financially by providing you with trusted fiduciary advice. With our wealth management services, retirement planning services, and financial planning services in Humboldt and Clear Lake IA, we provide all the tools you need to get back on track financially and ring in the new year right!
Contact us today to set up your complimentary session.
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