This was originally published on Monday,December 22, 2014, in the Pacific Daily News. Click here to subscribe to the PDN.
By now your holiday festivities are in full swing. You probably have started thinking about your New Year’s resolutions. Do your New Year’s resolutions include your finances? Before you set any financial goals, you need to understand where you are financially. An end-of-the-year review of your finances will help you set your 2015 financial goals.
• What is your risk tolerance? Are you about to retire? If so, your tolerance for risk will be lower than someone who is just starting their career. Although a higher risk usually has a higher rate of return, it also can have the higher possibility of the greatest loss. You also can determine your risk by how comfortable you feel. If the high risk is keeping you up at night, adjust it to where you feel comfortable.
• Is your strategy in line with your goals? When you started your retirement goals you may have been just out of college and starting your first job. Have you adjusted your plan to fit your current life situation?
• Did you start a new job? If so, you may want to check to see if your employer has a retirement plan. Can your current plan roll into the plan they are offering? Will your current employer contribute to the plan you currently have? Do they match your contributions? If so, how much? If your employer does match, you may be able to double your money by simply investing in your plan.
• How often do you track your progress? Because your money is being invested into other endeavors or stock, you cannot predict the future with precision. Check the progress of your plan at least every other month. If your plan is not reaching its goals, you may need to readjust your investments or increase your risk. With today’s technology, you no longer need to visit your broker. Most plans can be tracked online.
Do you have an estate plan? Do your loved ones know what your final wishes are or how you would like your estate divided? If you do not have one, you may want to make it a part of your New Year’s resolution. Having an estate plan will alleviate some of the stress your loved ones will endure when you die. Ensure your will, trust and advance health care directive are up to date. If there have been changes in your family dynamics, be sure to update your beneficiaries. Does your family know where you keep your estate plans? Have you discussed estate planning with your parents?
Recurring bills such as your mortgage, savings, emergency fund and car note can be paid by automatic deductions. By automatically deducting from your paycheck or your savings/checking account, you don’t have to worry about your payments being late or getting behind. Late or missed payments could affect your credit score.
Do you have enough at the end of the month to save? You may not think so, but if you keep track of your spending you would realize that there may be some way to save. How much do you spend on eating out? On cigarettes or alcohol? Five dollars here and there do add up. Do you have an emergency fund? How much do you contribute? If you do not have one you may want to make that a resolution for next year.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.