1. Consolidate Your Accounts: Don’t wait for spring cleaning to roll around. Make it easier on yourself by combining old 401(k) or IRA balances from your various old jobs. This can help cut down on the amount of paper you receive and improve the chances you’ll have a coordinated investment plan. And it’s just one more way to have a more ‘green’ holiday.
2. Pay Yourself First: While there always seems like there’s more month at the end of your paycheck, you can only get ahead by making a point of putting aside money in savings. It doesn’t matter if it’s just $5 or 5% of each paycheck as long as it’s consistent. Start somewhere and try to build up to your target of at least 5% of your net cash flow. Direct the money into a separate money market account that you can’t access easily from an ATM or debit card.
3. Get to Know Where Your Money Goes: For most people cash flow is not the problem. It’s cash retention that is a challenge. There always seems to be too much flow away from you. Set up a system to keep track of where your money is spent. Whether you decide to use a notebook or financial accounting software like Quicken or an online service like Mint.com, this is a first step to getting the information you need to decide what your spending priorities should be.
4. Cut Expenses: Armed with the information from your tracking, now consider ways to lower expenses. Do you really need a daily Mucho Grande from your favorite coffee place? At $5 a day, your habit could help pay for your annual vacation or pay down your credit card or mortgage debt. Do you really use all those movie channels? Can you wear a sweater and lower the thermostat? Do you really need to be in the mall? Cut down on impulse shopping by creating and sticking to a master list of groceries and household goods.
5. Reduce Temptation: Consider saving the bulk of any bonus checks or raises. By automatically diverting this money, you’ll be able to add to your emergency stash, have cash to pay down debt or even invest. See #2 above.
6. Reevaluate Your Risk Tolerance: One of the most useful services that financial planners can offer is helping you really articulate your goals and establish your tolerance for investing risk. After the bumpy ride of the past 18 months, most folks realize that they may not have had a handle on this.
7. Avoid the Casino Mentality: It is an understatement that investing in the market can be risky but now is not the time to try to play catch up by “doubling down” or chasing the hottest investments ideas. Remember the story of the tortoise and hare. Sometimes the race doesn’t go to the swiftest but the most consistent. So diversify your eggs into different baskets and watch those baskets. For help in choosing the right mix of investments and a style that will help you sleep better at night, consider meeting with a CERTIFIED FINANCIAL PLANNER ™ professional.
8. Rebalance Your Investments: Over time, accounts that have been consistently rebalanced tend to have higher balances. So plan to rebalance at least annually or even quarterly. But first you need to have targets in mind so that you can unemotionally prune back your winners while adding to the laggards.
9. Add to Your Retirement: If you haven’t taken advantage of your employer’s sponsored retirement plan, start now. If your employer doesn’t offer a plan or you’re self-employed, start your own. Resolve to set aside at least the amount that will get you the maximum company match. Ideally, you should know your “NUMBER” for living in retirement the way you want. Consulting with a CERTIFIED FINANCIAL PLANNER ™ professional can help you here.
10. Get Planning Advice to Map Your Route to Your Goals: Maybe you’ve winged it and thought your home and 401(k) were your tickets to a secure retirement. Odds are that your planning is not filling the bill. Sit down with a CERTIFIED FINANCIAL PLANNER ™ professional to discuss your whole picture and map out the action steps that will help keep you on track for financial success.
