Off to a fresh start: 8 financial resolutions for a brighter new year

When we think of New Year’s resolutions, losing weight or exercising typically top the list. As we move from “wealth building” to “wealth preservation,” though, making resolutions for our financial health is equally important.  We identified eight financial resolutions that can help strengthen your financial outlook and bring greater peace of mind for years to come.

  1.     Identify retirement goals

It makes sense. If you don’t know where you want to go, how are you going to get there? What are your thoughts for the future? Are you ready to retire and pursue your interests or perhaps relocate to a sunnier climate? Have you been dreaming of an entrepreneurial lifestyle after years in the corporate world? Perhaps you want to pack it all in and travel the world? Maybe you don’t have a grand vision but want the peace of mind that comes with living debt-free. Whatever your dreams, you’ll need to manage your finances to support them.

Start by listing your goals in order of importance.

Next, calculate what each will cost and when you want to achieve them. Are they realistic goals given your income and finances or will they require stringent measures or winning the lottery to achieve them? Naturally, if you’re married or in a long-term relationship you will want to approach your financial planning as a couple.

2.     Develop a pragmatic retirement plan

You may be one of the lucky ones who will be buying that little house in Tuscany. For those whose bank accounts just didn’t add up to that it’s time to envision a realistic, enjoyable retirement.

Take a hard look at how much you have saved and what you will need to support your lifestyle once retired.  Create a balance sheet–a snapshot of your finances–that shows savings, assets, debt, and liabilities. Then map out your income and expenses once retired.  This exercise can be reassuring if your financial picture is rosy. Or it can serve as a wake-up call to strengthen finances before retiring.

Plan for a long retirement by protecting your savings as you approach retirement age and insure your investments will continue to grow over several decades.  Funds you won’t need for at least 10 years should be invested for growth–preferably in broad-based stock mutual or exchange-traded funds.

Decide whether you will work.

Many boomers say they plan to work into their 60s or 70s. Delaying retirement for even a year or two can dramatically improve finances. Working part-time can improve cash flows and allow you to delay or make smaller withdrawals from retirement savings, giving them more time to grow, and to postpone Social Security to claim a bigger benefit. If working longer is part of your retirement plan, determine whether it will be at your current place of employment or somewhere else. Set a realistic salary target and identify any challenges that might derail your plans.

Once you know the state of your finances, consider how you want to spend your retirement. Retirement offers the luxury of a much freer schedule after decades of packed working days. It’s important to come up with a plan so you maintain a sense of purpose and vitality, as well as continue to nurture vital social connections outside of the home. Consider volunteer positions, sports/fitness, like golf or swimming, social groups, or part-time work. Be prepared for new opportunities.

3.     Develop a realistic budget

Once you’ve figured out where you want to go, the next step is to align your day-to-day spending and savings to get there. Set milestones–both financial and time wise–and work back to the present, breaking down how much money you’ll need to achieve them. While a realistic budget will help you manage your cash flows each month, it is not always easy. In fact, according to GOBankingRates’ 2015 Life + Money Survey, Americans cited sticking to a budget as their biggest money challenge. After you’ve listed your “dream” spending priorities, work from the bottom up and list your basic monthly expenses–-mortgage, utilities, food, etc.—and how you will cover them. Once done, you can begin to allocate any leftover income to your bigger goals. Whenever possible, allocate a little for enjoyment in the here and now. It’s motivating to enjoy small rewards for being financially responsible as you move closer to your goals.

4.     Reduce unnecessary spending

An honest appraisal of your spending is the first step to taking charge of your expenses and actively managing them. Are there ‘leaks’ in your spending where money just disappears? Perhaps you have a weakness for designer lattes or can’t resist the latest yoga wear? Or you haven’t gotten around to cancelling that on-line movie account you never have time to watch. Once you start to track expenses, you may be surprised by what you see. There’s no better time than the New Year to be more proactive and eliminate unnecessary spending. One simple approach is to divide your expenses into necessary (fixed) and discretionary (variable) expenses.  Next, look at your credit card and bank statements from the past few months. Examine your variable spending to see where you can reduce expenses and shift more money toward achieving your goals. Unsubscribe to unnecessary auto-renewal services.

For a jumpstart on budgeting, check out these five budgeting templates on The Huffington Post.

5.     Tackle debt

No one needs to be reminded that paying down debt establishes a more solid financial footing for retirement.  Paying off a mortgage significantly reduces monthly expenses and makes it easier to live on less, even if it seems impossible from where you stand now.  Consider the six scenarios for retiring without a mortgage from Kiplinger. As for other debt, like car loans and credit cards, there are several strategies for tackling them this year. If you have several outstanding debts, prioritize them from highest to lowest interest rates and then focus on paying off the high-interest debt first, usually credit cards, before working on other debts. This approach can save you the most money in interest payments.

If you are more motivated by seeing clear and tangible results, you can start by paying off the card or loan with the lowest balance first, then move to the next and the next, to feel a sense of accomplishment and gain psychological momentum for tackling the rest.

6.     Create an estate plan

It’s easy to put off estate planning. Death, and most certainly our own, is something most would rather not think about. Still, it is important to organize and have the right documents in place so that your estate will pass smoothly to loved ones with a minimum of difficulty. You’ll need to have a will or trust that lists where assets should go or the state will step in and decide for you.

You can appoint someone to make financial and healthcare decisions for you–using specific power of attorney documents–if you are no longer able to do so. To get started, check out the estate planning checklist compiled by the professionals at

Writing a will and other legal documents like powers of attorney need not cost a fortune if your assets are not complicated. There are do-it-yourself kits online and low-cost attorney services from organizations like Legal Zoom that can help you complete your estate plan this year.

7.     Plan how to maximize Social Security benefits

Social Security benefits make up 38 percent of income for the average retiree. With so many options and strategies for claiming these benefits, it’s essential to develop a plan to maximize your pay-out according to your personal financial situation.  (If you’re married, you’ll need to coordinate these benefits with your spouse.)  The first step is to become familiar with the system by creating an online account at You will be able to see how much you have paid into Social Security and get a personalized estimate of how much you can expect to receive in retirement.

The full retirement age for baby boomers is 66, when those born between 1943 and 1954 can claim full unreduced Social Security benefits. It gradually increases from 66 and two months for those born in 1955 to 66 and ten months for those in 1959. People born in 1960 or later become eligible for the full retirement benefit at 67. Payments increase each month you delay until 70. In fact, retirees can boost their monthly payments by 24 to 32 percent, depending on when they were born by waiting until they are 70 to claim. After 70, there’s no benefit to waiting further.

As you near retirement, you can run various pay-out scenarios using the benefits planner at For a more detailed perspective, consider buying the program at ($40). This program goes well beyond any calculations on the website, including being able to jointly optimize claiming decisions with a spouse and advice on which benefits to claim, and when to maximize lifetime benefits.

8.     Continue to save

If you are still working, whether by choice or necessity, continuing to save will help you realize the retirement you just outlined in the previous steps.  It’s easier to develop a savings plan once you have clear life goals as they’ll give you more motivation to manage and, hopefully, increase savings in 2017.  Financial planners advise that we should save at least 15 percent of our annual income to achieve this goal. Try increasing that amount by one percent or more in 2017.

There are many different ways to increase your savings.

The easiest way to fatten your retirement savings account comes from directing any raises, tax refunds or other windfalls toward your goals. Next, allocate any savings you recoup from more mindful spending.

Being proactive and automating contributions to savings and retirement accounts is an easy way to save more without really thinking about it. And it feels great to see your balances grow.

Automating your savings clearly applies to any company 401(k) or other retirement plans. If not doing so already, increase your contributions at least to the point where you take full advantage of employer contribution-matching programs.

Once these eight steps are put into place you will likely forget about them and easily adjust to a slightly lower level of spending. Unlike New Year’s resolutions to lose 10 pounds or exercise regularly, once done you won’t need a constant reminder to achieve the goals for your future.


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