It’s 2014. Odds are you made a resolution this year. Maybe you want to lose weight, get a new job or learn to cook. But how do your finances look? If you aren’t thinking about retirement, education or just saving for a rainy day, 2014 is the time to start. If you are thinking about it, where do you stand? Regardless of your situation, I’d like to challenge you to do a few things to better your financial situation in 2014.
1. Plan. No matter where you are in life, it’s important to have a plan. Start by setting goals. Do you want to buy a house, have children, send your children to college or retire by a certain age? A savings account is great, but without a solid roadmap it will be tough to achieve all those goals. Consider how you’ll save for all these things. Will you use a state-backed 529 for college savings? Do you know what that is? And how much will you save? What can you afford? If you do nothing else this year, start by making a plan!
2. Automate. Did you know that 46 percent of American workers have less than $10,000 saved for retirement? Retirement planning is one of the most important things you can do for yourself. While starting earlier is better, it’s never too late to start. One of the easiest ways to make sure you’re saving is to automate – or to put your retirement savings on “cruise control.” If your employer offers a 401(k), opt in! Psychologically, automating keeps you from having to “make a decision.” If it’s automatic, you won’t notice it. But you’ll certainly benefit from the savings later.
3. Rebalance. Things change, and they change often. If you already have an investment portfolio, you should be rebalancing it at least every year. Talk to your financial adviser about how your investments look. Re-evaluate your funds. Should you consider selling any of them? You should also make sure that your asset allocation isn’t lopsided. If it is, it’s important to rebalance your holdings to ensure that you’re getting the best return on all your investments.
If your head is swimming, don’t worry. This subject is tough to master on your own. So here is a fourth tip to consider – talk to a financial adviser. Find someone you trust who can take the time to navigate these financial questions for you. Then check back at the end of the year to see where you stand. Hopefully, in 2015, you’ll be resolving to continue your success.
John Phillips is the chief investment officer at Red Door Wealth Management in Memphis.