New Year’s Resolutions 2018
4 Things You Can Do to Start The New Year on the Right Financial Foot.
1.) Sign-up for your company 401(k) / Retirement plan – There is no time like the present to do something good for your long-term financial health. Your future self will thank you. Even if you can’t save a lot into the plan, set it up, it’s easier to make increases after you’ve built the habit of making regular contributions.
2.) Increase your 401(k) / Retirement Plan contributions – Your goal should be to save 10% of your pre-tax income – not including employer match – into your retirement plan. This can be a challenge, but it doesn’t have to happen all at once. Make 10% a goal to work towards, but start achieving it now by increasing your current contribution. Some plans let you sign up for regular incremental increases – it will go up by 1 or 2% per year until you’ve reached your goal. I say 10% because in my experience, that savings rate will create a healthy balance in your retirement account.
3.) Re-balance your investments – If you’ve already set up your retirement account, then one thing you can do to improve is to rebalance your investments. This means, setting up your account so that it regularly adjusts your investments back to the original plan that you started with. If you don’t rebalance, investments that have grown faster than others will now represent a larger part of your portfolio and you may be taking more risk. Investments often go in cycles and this year’s winners can be next year’s losers. Rebalance to make sure you don’t get caught off guard. Rebalancing also forces you to sell high and buy low, the most common but most ignored bit of investment wisdom. I recommend setting your account to rebalance once per year. Many plans will allow you to give them instructions on how you would like to rebalance, so you don’t have to manually rebalance your investments by yourself.
4.) Investments: Make sure that you are using the right investments in the right combination in your 401K account. Your company 401K plan provider or your Financial Advisor can help you with this. It’s important to make sure that your picking investments because they will help you reach your long-term goals, not because they had the best performance when you looked at the list of available options. If you would rather not deal with this at all, pick a target-date fund. Target date funds are matched to the time you think you’ll likely retire and they manage the money in an optimal way for someone that fits that timeframe. They are an easy way to outsource the management of your retirement money.
Happy New Year! Hunt Country Wealth Management wishes you a prosperous and healthy 2018!
Article Written by Chris Merchant, CFP™ Hunt Country Wealth Management