HARRISBURG, Pa. (WHTM) – The New Year is almost here, and many people are making resolutions. Losing weight and eating healthier foods are some common ones but getting your finances in order is something many people don’t think of.
A financial planner says the biggest mistake you can make in the New Year is racking up credit card debt you can’t pay off each month because of high-interest rates. He has five tips for a more prosperous 2016.
“In the New Year, try and determine a budget. Project your income and your expenses, and try to determine whether you’re going to have some surplus income that you can use for different things, but most importantly, when you’re doing your budget, try to come up with a way to strategically pay off all the holiday debt that you accrued,” said Sean Reading, a financial planner with the North Star Financial Group in Palmyra, Pa.
The second tip to get your financial house in order is to open a retirement account. Try to capture your company’s entire match. Increase what you’re already saving if you already have a retirement account. People who are in a lower tax bracket should use a Roth IRA.
“Another thing we like to look at along those lines is maybe rebalancing your investment portfolio. It’s one of the most important things you can do. If you started out with maybe a 60/40 stock bond allocation, take a look at that and see if you’re still in that allocation,” Reading said.
The fourth tip is to have estate plans current with today’s law. It’s crucial for you to have a will, a health care power of attorney, and power of attorney. Your spouse will have to go through the court system if you don’t have a power of attorney.
“Life insurance can be vital in case something happens in an untimely fashion,” Reading said. “Look at life insurance, and make sure you have the proper amount of coverage. One of the best ways to determine that to go to a website. It’s called www.lifehappens.org.”
Reading said people who don’t have a lot of money to save should make a small contribution to a Roth IRA. It’s tax deferred, and when you get to retirement, it’s tax-free. Putting $25 a month into it will start adding up quickly.
Savings accounts have very low-interest rates now, so the best way for your kids to start saving is a dividend reinvestment program through different stocks. Reading suggests picking out companies your kids may know, such as Disney or Under Armour.