Get a financial plan in place
A properly constructed financial plan analyzes your current situation, helps you establish financial goals, provides benchmarks against which to gauge your progress, and includes implementation suggestions. If you don’t have a financial plan in place this should be your first step in 2013. If you don’t have a roadmap for your financial journey how will you know where you are headed and how to get there? If you do have a plan but haven’t reviewed it lately, now is a good time. Are you on track? Are some adjustments appropriate due to changes in your situation?
Take full advantage of your company’s retirement plan
If you are able to do so, max out your 401(k) contributions for 2013 (the limits are $17,500; $23,000 if you are 50 or over at any point during 2013). If you can’t afford the maximum contribution, try to contribute at least enough to get your company’s full matching contribution if one is offered. One way to painlessly increase your contributions is to take any percentage salary increase you receive each year and increase your 401(k) contribution by that percentage. Your retirement plan may not be perfect, but it does offer a vehicle to save for retirement on a regular basis, and over time a properly managed account can grow into a significant retirement asset.
De-clutter your financial life
Take a look at consolidating all of those old 401(k) plans and IRAs. Take a look at your spending and get a handle on where your money is and where it is going. Make sure that your beneficiary designations on retirement plans, IRAs, insurance policies, and annuities are up to date. In general, simplify things to make monitoring your financial situation as easy as possible.
Control what you can, and ignore all of the financial media hype
I received an email from a retiree indicating that he was making several investing moves simply because of his fears about the Fiscal Cliff and the situation in Washington. While I understand his frustration and perhaps his fear of another recession, short-term moves in anticipation of an event are usually not a good idea. A well-constructed financial plan should be your guide. It was my experience that those investors who sold their equity holdings during the 2008-09 market decline ended up being sorry they did. Remember Y2K? Much hype not much else. The markets will fluctuate over time. We have no control over this and most of us do a poor job of timing the markets. What you can control is how much you save and how you allocate your investments. You can’t control what the markets and the economy might do in 2013. I’m not advocating that you shut yourself off from the financial media. I am merely suggesting that you step back and rely on your financial planning and investment strategy during periods of market turmoil. It is generally a bad idea to overreact to the crises of the day.
Hire professional help if you need it
Many very capable people don’t do as good job with their finances as they might for many reasons, including a lack of time. Find a good fee-only financial advisor to provide the help you need, whether for a one-time financial planning review or for ongoing advice
I hope that everyone has a very Happy New Year and a prosperous and healthy 2013.
Please feel free to contact me with your financial planning and investing questions at any time.
Check out our Resources page for links to some services and tools that might be beneficial to you in 2013.
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