New Year’s resolutions have been around for thousands of years. According to histo
In modern times, New Year’s resolutions aren’t made to the gods, but to one’s self. That may be why, according to stati
So how do we make resolutions we can keep? Psychologist Edwin Locke’s goal-theory states that to increase the likelihood of reaching your goals, they must be specific, clear, realistic, and challenging. So, if you want to increase the chances of reaching your goals next year, instead of telling yourself this year, you want to lose some weight, say something like, “I want to lose 20 pounds by June.” A goal like that is achievable with hard work and has a specific time frame.
With that in mind, here are some financial New Year’s resolutions for 2018:
With this information you should be able to tell if you’re on track to reach your goals or need to make any course corrections. Has your credit card debt increased? Are your savings growing? Are you contributing regularly to your 401(k) plan? A review of your net worth will expose areas of your spending where there might be areas to cut back or save more.
The most common reason people tell me they don’t increase their 401(k) contributions is they won’t have enough take-home pay to live their lives if they contribute. In my experience, most people are surprised by the small difference in their take-home pay even when they max out their retirement contributions. To help you determine how much you can save each period, incorporate your retirement savings into your regular budget.
If you owe money on your credit cards, determine how much you can realistically afford to pay off during the year. A good rule of thumb is to pay off your highest-interest-rate credit cards first, then concentrate on the lower interest rate cards. This strategy decreases your interest costs and eventually leads to more money in your pocket and not the credit card company’s pocket. When following this strategy, avoid or limit additional purchases on those cards.
If you have money left over after paying off your credit cards and adding to your savings, consider making payments towards the principal on your mortgage. This strategy shortens the length of your mortgage and will pay off your mortgage faster. However, if you must choose between adding to your retirement nest egg and paying extra on your mortgage, talk to your financial advisor to determine which option is more suitable for you.
Setting realistic New Year’s resolutions leads to greater success in reaching your goals. The steps in this column are manageable and can be broken into bite-sized pieces to increase the likelihood of success. Make a checklist with simple tasks to keep track of how you are doing, and if needed, make changes throughout the year. Review your plans with your financial advisor now and throughout the year and the chances of your success greatly increase.
Anthony N. Corrao, an independent advisor with Corrao Wealth Management, has a website at www.corra
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