Getting Started In The New Year
Dec 31, 2016 09:16PM
by Barry Wind and Jeremy A. PearceMany people look at the end of the year as time that has gotten away. Others might look at the coming new year as a great opportunity to do what’s right, get organized, and make next year better than the last, perhaps using a new year’s resolution or two. Lots of wonderful people are looking at the new year as the beginning of their journey toward a financial life that is in order and working for them. Resolution: I hereby resolve to review my financial objectives, make changes if necessary, and initiate and continue any and all successful actions.
Obviously, any journey first requires a map or plan of some sort, not unlike taking a trip to see relatives over the holidays. Finding some quiet time to consider and identify your financial and life objectives will pay huge dividends when you actually start to work to achieve such goals. Do you want to buy a home for your family? Do you want to address saving for retirement in a meaningful way? Outlining your objectives, writing them down and creating realistic action steps for reaching those goals is an excellent end-of-year activity for everyone from young adults, to new parents, and, yes, even for those of us with a few gray hairs.
One action that everyone can take is to be prepared financially for all those unforeseen and unfortunate events that pop up into our lives. An emergency fund is the cornerstone of a sound financial plan. Many financial advisors recommend that your emergency fund cover at least three, if not six, months of household expenses. Unfortunately, two-thirds of Americans would have difficulty coming up with the funds for a $1,000 emergency, according to a recent poll by The Associated Press-NORC Center for Public Affairs Research.
If saving for a rainy day feels overwhelming, then start small…but start! Try to put a bit into your emergency fund each month or pay period. And if your standard of living goes up, so should your emergency fund. Lastly, make you sure you can identify what is a legitimate emergency. Buying a fancy new car is probably not. Losing your job or having major medical bills probably are. Resolution: I hereby resolve to begin or continue making monthly contributions to my emergency fund.
One more commitment we all can take is to address our retirement. Start, increase or maximize contributions to retirement plans, either at work or through an IRA. For young folks just starting out in the work world, remember it is never too early to start saving for your retirement. In fact, the earlier you start, the longer your investments have to grow. If you’ve been in the workforce for a number of years, try to maximize any employer contributions to your retirement plan that may be available. And if you are a bit older and still haven't started a nest egg, remember, it's never too late to start saving for retirement. Resolution: I hereby resolve to make contributing to my retirement a priority by growing my IRA or my employer retirement plan.
Another way to be prepared for what life throws at us is to obtain disability insurance. If you are unable to work due to injury or illness, disability insurance can provide a stream of income to get you through this rough period. If you are a parent, life insurance can offer protection and income to your family in the event of death. Often, both disability and life insurance are benefits offered through your place of work. For others, private insurance may be an option. Depending on your family's budget, insurance may have to wait but it is still important to consider what your family stands to lose in the event of injury or death. Resolution: I hereby resolve to identify my disability and life insurance options and determine if these are a sound financial investment for me.
Some consider planning for the future the most fun you never want to have again. Certainly following any of these steps might be easier said than done. But without a doubt, they are much easier than you think, especially if you engage the help of friends, family or a financial advisor. Starting 2017 off the right way will not only make this year brighter but will help you make every year after one to celebrate. Have a great 2017!
Barry Wind and Jeremy A. Pearce are financial advisors in the Washington, D.C., area, specializing in socially responsible investing with SharePower Responsible Investing, Inc. Comments and questions can be sent to [email protected] and [email protected]
Investing involves risk including loss of principal. Different types of investments carry varying degrees of risk and clients and prospective clients should be prepared to bear investment and original principal loss. Investing, including socially responsible investing, does not guarantee any amount of success. These are the opinions of the author and not necessarily those of Cambridge Investment Research, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
Securities offered through Cambridge Investment Research, Inc. member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and SharePower Responsible Investing, Inc. are not affiliated.