It is good to have goals and plans financially for the New Year, but it is equally important to do the right things consistently and avoid doing the wrong things. It is critically important to get counsel and wisdom and avoid missing opportunities or blundering financially. I don’t want “that experience that I can learn from”. Here is a short list of things to do right . . . and things to avoid doing.
Save your increases
Our inclination is to get that item we want (not need) with our excess resources or windfalls of extra money. Be disciplined to save it into your emergency fund or pay down high interest debt. If you get a raise in 2017, aim to put at least a portion of it in a retirement account. If you receive a raise or cost of living adjustment, increase your savings by that amount. When you receive a windfall of cash such as a bonus, tax refund or inheritance, consider investing for your future instead of immediately spending it. Try to complete all of your financial obligations out of your salaried income and have the bonuses go straight into savings. You can even directly deposit part or all of your tax refund in an individual retirement account.
Be smart with retirement savings
Saving for retirement is easier when your employer chips in. If your company provides a 401k match, make sure you deposit enough in a retirement account to claim the employer contributions — its free money. Best of all make it automatic! Have it directly taken from your salary (401k) or from your checking account into a Roth IRA. These accounts are easy to establish online or with a licensed investment professional.
Give up expensive indulgences
Before the end of the year, make a concerted effort to eliminate at least one indulgence. This includes things like drinking too much alcohol and smoking, as well as habits that aren’t as dangerous to your health but have negative effect to your finances. Do you have a routine of stopping for coffee and breakfast every morning on the way to work? If you can eliminate this $5 daily purchase from your budget, you’ll save about $25 a week, or $100 a month. Pack your lunch, plan out your shopping and entertainment with discounts, coupons and Groupons. Instead of that expensive weekly dinner out, plan to eat at home. Stay away from malls and only go to retail stores after you have pre-planned your purchase and shopped prices. Be careful of online shopping too. It is so easy to spend money on things that you don’t need.
Reduce your expenses and save the difference
When you finally pay off your student loans, credit card debts or other past purchases, consider putting the amount you used to spend on debt payments into a retirement or savings account. Divert that same monthly payment into retirement savings. Your budget won’t feel the difference, but your long-term savings goals will. Reduce expenses by downgrading your cable package or getting rid of cable altogether (sling TV, Netflix, or Firestick), using coupons to lower your grocery bill, or riding your bike or carpooling to work a few days a week to save on transportation costs, or just sell the extra car you have and drop the insurance. The savings add up quickly, and before you know it you’ll have a more savings and more investments.
It’s difficult to know if you are saving enough or are properly diversified when you have 401(k) accounts with several different employers. Locate any old 401(k) accounts or pensions from previous employers to be sure you have an accurate list of all your funds. The first step in increasing your savings is to know what you already have. Less can be more. If you’re tired of clutter or feel the stuff you own takes too much of your time and energy, set a goal to simplify and unload a few possessions. Selling off items can put extra cash in your pocket, plus you can save money on storage fees and free up space in your house, garage and closets.
Improve your career and work income
If you aren’t earning enough money to invest a respectable amount for retirement, you may want to start acquiring the skills that will allow you to negotiate a higher salary or change careers altogether. It may be necessary to spend some money and time on yourself before you are in a position to increase your retirement savings. Perhaps that means taking a class to learn a new skill or maybe going back to school and earning a new degree all together that enables you to secure a higher paying job. Consider starting a part-time money making project on the side and using that income to save for retirement too. Many successful businesses have been started this way. Just keep any business expenses or investment to a minimum and don’t presume on profits or fast growth. Also, don’t get lured into multi-level business propositions unless you get good counsel. If you don’t like sales, then don’t get into these programs.
Don’t get obligated to all those monthly costs
Expensive cell phone plans, multi channel home entertainment, out of control iTunes bills, security and ID protection, all kinds of membership dues, and on and on. Cut them, reduce them, negotiate them and just do without all those financially sucking expenses. These consistent automated bills enrich all these companies while you work to keep up . . . or worse, get further behind with debt.
Okay this is a big list, but it is certainly not comprehensive. Pick out a few from these, or come up with some other ideas and implement them right away. Write down your progress weekly and keep track of your progress. Share your goals with a friend, and if you are married, get in agreement with your spouse what you can accomplish together, and don’t make healthy goals a point of contention. Good luck in 2017! You’re welcome to call me to discuss your ideas or get my perspective.
Jeffery Masters, President of Jeffery W. Masters & Associates 954-977-5150. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Independent Financial Partners, a registered investment advisor. Independent Financial Partners and Jeffery W. Masters & Associates are separate entities’ from LPL Financial – Jeffery.Masters@LPL.com