For many of us, the new year means a fresh start and the chance to set new goals. If your resolutions are money related, here are some ways to strengthen your financial foundation in 2019.
1. Review your financial picture
As the saying goes, it’s hard to know where you’re going if you don’t know where you’ve been. Review your investments and savings, and consider where you have opportunities to improve your situation. Reflecting on the financial decisions you made — or wish you made — in the last year can be an eye-opening exercise to help you decide what to focus on in the year ahead.
2. Prioritize saving for retirement
The reality today is that Americans are more responsible for their retirement than previous generations because pensions are increasingly less common. Although retirement may feel far away, the earlier you increase the amount you’re contributing annually, the more you can harness the power of compounding interest. Maximizing the amount you contribute to an individual retirement account and increasing the percentage of your paycheck going into your 401(k) are two ways to boost your retirement savings.
3. Consider your goals
If you are setting other new year’s resolutions, such as hiring a personal trainer, mastering a new skill or traveling overseas, incorporate the cost of pursuing these activities into your budget.
4. Consider paying more toward your mortgage
If you have a mortgage on your primary or vacation home, evaluate if it makes sense to eliminate the debt before retirement. Paying extra each month may reduce your cash flow in the near term, but it can be worth it if you want to enter retirement mortgage free. Accelerating your payments may have tax implications, so review your situation with a tax professional before making this a financial focus in the year ahead.
5. Check your credit score
The new year is a great time to review your credit report for accuracy. Three credit reporting agencies Trans Union, Equifax and Experian, are required by law allow you to receive one free copy of your report annually. Keep in mind that reports may vary between agencies. If you plan to purchase a new boat, car, vacation home or another big item soon, checking your credit score (and improving it, if necessary) can help inform you of what interest rate you may qualify for.
6. Seek professional advice
If you are balancing multiple financial goals, know that it’s possible to make progress toward each if you are intentional about how to allocate your dollars. Talking to a financial advisor can help you sort out your priorities and decide on a strategy for the new year. Professionals also provide accountability, helping you stay focused on the big picture.
It takes discipline to remain focused on saving and spending in alignment with your long-term goals. As you think about the year ahead, remember that a little effort today can make a big difference in helping you feel more confident about your financial future.