.....Advertisement.....
.....Advertisement.....

Top 10 financial resolutions for the new year

-A A +A

By Bradley D. Holland

The Thanksgiving and Christmas holidays are a time to eat, drink and be merry. Reality typically sets in on New Year’s Day, which leads to the traditional round of resolution-making.
This year (in addition to pledging to eat better and exercise more), you may want to consider these 10 resolutions to help put your financial house in order.
1. Think strategically about finances
When it comes to vacations, most people plan months ahead, carefully selecting a destination and the best way to get there. Financial decisions should involve the same type of strategic thinking. It’s advisable to choose a financial destination and then map investment, savings, insurance and household needs to arrive as planned. Individuals who think strategically will know if they are on track to reach their goals and when they need to adjust their overall plan to match their financial situation.
2. Develop financial relationships
It’s never a good idea to make major decisions in a vacuum. Therefore, it’s important to develop relationships with people who can help guide you toward your financial well-being. Get to know them, and let them get to know you. That way, it’s more likely they’ll go the extra mile to provide the kind of personalized service that can keep your goals on track. A good accountant can help you save money. A banker can help with loans when you really need them, and a lawyer can make sure your personal affairs are in order. A financial planner can act like a quarterback.
3. Maximize savings, minimize debt
Limiting debt is critical to reaching your financial goals efficiently. Therefore, it’s important to keep nondeductible interest to a minimum. As you liquidate debt, you may want to direct those dollars to savings. It’s advisable to maximize your savings by contributing to pre-tax retirement savings plans such as a 401(k), a health savings account or a 529 college funding plan. In addition, you may want to consider making major household purchases on a “pay-as-you-go” basis. Anytime you reduce debt, you are, in effect, giving yourself a pay raise.
4. Review household expenditures and set a budget
While often overlooked, cash flow management is fundamental to financial planning. Basically, this means spending less than you earn. Accordingly, it’s advisable to set priorities, decide how much to save and then adjust your budget accordingly. Try tracking your expenditures for three months so you know where your money is going. This way, it’s easier to start making intelligent decisions about spending habits.
5. Review employment and education options
Too many individuals fail to take advantage of employee benefits, especially when it comes to retirement plans. Most companies match a portion of an employee’s 401(k) contribution. An increasing number of companies also match contributions to college and health savings accounts and provide tuition reimbursement. An advanced degree can enhance your earning potential, so find out if your company can help finance higher education.
6. Plan ahead for marriage and family
You may not have tied the knot yet, but if you plan to marry someday, it’s advisable to start planning now. For example, do you and your partner see eye-to-eye on financial matters? Do you know whether you’ll use a joint checking account or separate accounts? How many children, if any, do you plan to have? How will a family change your insurance and housing needs? Financial arguments can frequently lead to divorce. By planning ahead, you can help minimize stress on your marriage.
7. Develop a crisis management plan
A financial emergency usually strikes when you least expect it. The best hedge is an emergency savings account equal to at least three—and ideally, six—months of living expenses. Repay the account promptly, even if it means cutting back on other things. The goal is to avoid piling up debt—or worse, bankruptcy. A crisis management plan can help provide financial security and keep you moving toward your financial goals.
8. Review insurance needs
You can use insurance to protect your assets. Life insurance can provide an adequate financial cushion in the event of a spouse’s death. Therefore, it’s important to regularly review your policies. Many people overlook disability coverage, but insuring against the loss of earning power is essential to sound financial planning. A long-term healthcare policy can help you pay your expenses in the event of a serious illness or injury. And, if you have a high salary or significant net worth, you should consider a personal liability umbrella of up to $1 million to protect against liability risks.
9. Leverage assets
You should consider leveraging assets to take advantage of long-term financial opportunities. If you have a low-interest mortgage, for example, you could think about directing any extra cash to higher-potential return investments rather than paying down the loan. A home equity loan is usually cheaper than a consumer loan, and interest is tax-deductible.
10. Manage your taxes
Taxes can take a big bite out of income and capital gains. Therefore, you may wish to consider the following steps:
•    Maximize your and your spouse’s 401(k) and IRA contributions.
•    Consider opening a health savings account, even if you don’t plan to use the money.
•    Consider selling stock before the end of the year if it generates losses.
•    Think about increasing charitable contributions or setting up a trust.

Bradley D. Holland is the owner of Holland Financial Group in Shelbyville and an investment advisory representative of Lincoln Financial Securities Corporation, member SIPC.  He can be reached at 800- 774-1806.