Even if you’ve already made your new year’s resolutions, you should consider adding these important financial items to your list:
- Stick with a long-term financial plan and investment strategy. Don’t let emotional reactions to short-term events, market volatility or the new administration’s policies influence your investment decisions. Have, or create, a long-term plan and follow it.
- Focus on things you can control in your financial life by paying attention to items such as mutual-fund expense ratios (generally speaking, the lower the better), asset-allocation strategy (diversification appropriate to age and other factors) and personal savings.
- Automate contributions to retirement accounts, savings accounts, college savings accounts and the like, and do the same with bill payments, to remove the guesswork and the temptation to forego a contribution or skip a payment.
- Treat your household finances like a business. Practice fiscal responsibility like a well-run business does. Create financial statements for yourself and allocate capital accordingly, making purchases only when they align with your overall objectives; be deliberate and thoughtful in everything you do.
- If you have an adjustable-rate mortgage (ARM), consider refinancing. Interest rates are low, and if you haven’t spoken to your mortgage broker, now might be a good time to call.
- Review your overall financial plan. The new year is a great time to refine your goals, review last year’s spending, tweak insurance coverages and be sure estate documents are in order, including health-care directives and powers of attorney.
- Get a second opinion on your financial standing and your financial plan, if you have one. Do you really need the high premiums of that whole life policy? What about that annuity, does it still make sense? You may own some financial products that were purchased years ago, and it might make sense to change them now if your situation has changed.
- Pick up a book about behavioral finance. My favorite new book on personal finance is, hands down, “The Psychology of Money.” In the book, award-winning author Morgan Housel shares 19 short stories exploring the strange ways that people think about money, and teaches you how to make better sense of one of life’s most important topics.
Good luck with your resolutions and may 2021 be a better year than 2020!
JASON E. SIPERSTEIN, CFA, CFP, RMA, is the chairman of the Financial Planning Association of Rhode Island, Program Director for CFA Society Providence and president of Eliot Rose Wealth Management. He can be reached by email at firstname.lastname@example.org.