8 Tips for Having a Financially Fit 2016
LearnVest Founder and CEO and Entrepreneur in Residence Alexa von Tobel offers her advice for making an important resolution stick.
From the Ivanka Trump Collection: Rio Credit Card Holder and Patras Pendant Necklace. From Alexa: It’s the New Year, which means it’s time for a clean slate. You get to reflect on how things went in 2015 and commit to a game plan for the year ahead. But don’t just stop at commitments to eat healthier and exercise more—it’s time to get yourself financially fit as well. And you certainly won’t be alone: financial resolutions regularly rank among the top New Year’s resolutions nationwide. Ready to start 2016 off on the right foot? Here goes.
1. Rip off the band-aid
It’s time to face the numbers and assess where you stand. Once you take stock of where you are, you can start to figure out your goals, and set a plan to reach them. To take a look at where your net worth stands—from your checking and savings to credit cards and mortgages, link up your accounts to a tool like LearnVest.com.
2. Update your passwords
I’m sure you have many versions of passwords out there, and it can get pretty confusing to remember them and stay organized. Now is a great time to update your passwords and to make sure they’re as strong as possible to protect your data. Follow best-practices like using unique passwords for different accounts, making them longer (and harder to guess), and consider enabling multi-factor authentication.
3. Put your bonus to work (and play)
If you’re lucky enough to come into a year-end bonus, I know it’s probably tempting to reward yourself and blow it on something fun. But you will probably feel better in the long run if you instead put that money toward reaching your goals. At LearnVest, we recommend putting 90% toward your goals (like buying a home or paying off credit cards), and then use the remaining 10% to treat yourself. You’ve earned it.
4. Look ahead to retirement
Take stock of how you’ve been doing with your 401(k) and other retirement savings vehicles in the last year, and then make plans for improvement. 401(k) contribution limits are staying the same in 2016 (they remain at $18,000), but if you aren’t currently maxing out your retirement accounts, consider upping your contributions by at least 1%. Those little increases can really add up in the long run.
5. Save for a rainy day
If you don’t have an emergency fund, your financial footing could be at risk. A 2014 survey found that almost half of Americans couldn’t handle an unexpected expense of $400 with cash on hand, and if you have to rely on your credit card, it is all too easy to fall into debt. To make sure you’re prepared, I recommend having at least six months worth of take home pay in a separate savings account. If that sounds like a lot, set your first goal to be one month, and build up from there.
6. Reduce Fees
As you settle into the new year, take stock of any fees you might be losing money to (think: everything from late fees on credit cards to investment management fees). If you have any mutual funds, take a close look, as their fees can be costly. Once you’ve identified what fees are costing you, you can then start to strategize how to cut down. This can be a smart time to reevaluate your investments and make sure everything is allocated to help you reach your goals.
7. Generate extra income
If you want to take your money to the next level, consider finding ways to earn more this year, from working as a TaskRabbit to renting an extra room on Airbnb to selling any closet clutter.
8. Stay committed
Just like a key to staying physically fit is to create a workout routine, you should consider setting up a regimen to help keep your money in good shape (in fact, that’s what our LearnVest planners work with clients on everyday!). If you’re like most Americans, you will probably forget about your New Year’s resolutions by mid-February, but by setting up checkpoints now while you’re motivated, you might be less likely to cast your resolutions aside. So, set a reminder on your calendar to check in a month from now and consider enlisting a friend (or planner) to help hold you accountable. For more advice from Alexa, read her recent columns on personal finance, or visit her online at LearnVest.com. LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company. Images Courtesy of Ivanka Trump Photographer: Nathan Kraxberger