As the new year approaches, many of us make resolutions to better ourselves in the months ahead. While it is often seen as a joke how few people stick to their promises for improved health and fitness, this resolution should not be taken lightly – for if you are determined and focused on your goal, anything can be achieved.
Many people make resolutions to exercise, eat, and live healthier lifestyles. However, fewer individuals take the time to focus on their financial health – which is just as important. Committing to getting your finances in order can have lasting benefits that will help you achieve long-term success.
As the new year begins, it is ideal for retirement savers to reflect on their financial objectives and status and make any necessary changes to accomplish them. Everyone who wishes to secure their future finances should do this exercise at least once a year. Here are five financial new year’s resolutions you can incorporate that will optimize your overall prosperity:
1. Develop a Retirement Investment Plan
Although many people save for retirement, only a few have retirement savings plans. That’s understandable since most workplaces offer 401(k) investment programs that make it effortless to stash away money and watch their retirement accounts grow. Unfortunately, this doesn’t always mean they’re in great shape financially. Understanding the importance of an effective retirement saving plan is essential if you want lasting financial stability!
Although many folks pay close attention to their balance growth daily, they often overlook the planning needed if those balances start decreasing. In addition, crafting a retirement plan for the future is also essential. Although investing all your resources in one 401(k) program may appear profitable during booming markets, how secure will your savings be when times get tough? You must devise an effective long-term strategy to be prepared no matter what happens in the market!
As you craft a retirement investment plan, set tangible objectives. Ask yourself what you want to have in the next 5, 10, or 20 years. How much money will be withdrawn annually? What amount should I invest now, and at what growth rate to reach my financial goals efficiently? Scrap anything that does not contribute towards fulfilling your aims for financial stability in financial life after retirement.
2. Rethink the Way You Invest
Recently, alterations to retirement savings account have been prevalent, particularly concerning required minimum distributions (RMDs). The RMD age has consistently evolved – rising from 72 to 73 and hitting 75 by 2033. This shift can elongate your investment timeline and motivate modifications in your investments’ composition and risk profile.
It’s essential to look at the most recent changes in tax laws, as they could affect your retirement planning. Automatic 401(k) contributions, alterations to early withdrawal penalties, and adjustments to catch-up contributions are all modifications that will make a difference. Now is the time to schedule consultations with your financial planner and tax adviser to evaluate how these new regulations may influence your situation.
3. Find More Ways to Save and Invest
You don’t want to reach retirement and regret not having saved enough money. Now is the time to review your expenditure, savings rate, and investments so you can establish ways to add further funds to your retirement nest egg.
Even small choices, such as skipping out on a bar of chocolate at the store or bringing your coffee to work daily, can make an enormous difference. By creating and adhering to this habit consistently, you could save an extra $100 per month! This is no insignificant amount; when put towards investing in your retirement portfolio, it may mean tens of thousands more dollars by the time you retire.
4. Diversify Your Portfolio
Just as you don’t want to allocate your savings into one 401(k) account, the same goes for different investment classes. Investing 100% in stocks can result in immense losses during a market crash, while having 100% of assets invested solely in bonds means potential loss when markets become stagnant. To ensure long-term growth and financial security, it’s best to diversify investments across multiple asset categories.
Your desired timeline, risk tolerance, and financial objectives determine asset class investment percentages. As market conditions shift, the makeup of your portfolio should also adjust accordingly to meet these changing demands.
Many believe investing in stocks and bonds is sufficient to diversify their portfolio. However, both assets are highly correlated with Wall Street’s market performance – meaning should a financial crisis arise, the value of your investments could plummet. That’s why it can be beneficial to incorporate alternative asset classes into your portfolio, including gold and precious metals, real estate, or commodities. This will enable you to safeguard yourself against any potential downturns on Wall Street by spreading out and protecting some of your wealth elsewhere.
5. Protect Yourself Against Risk
Investing involves risk! Risk is unavoidable in investing, and we will eventually experience some losses. Successful savers minimize their losses – especially when the market takes a turn for the worse.
While making big profits may be desirable, if it comes with huge potential downsides, you might want to consider sacrificing some gains to invest in more reliable assets that won’t expose you to excessive losses.
Precious metals like gold and silver may be your saving grace, as their growth over the long term, performance during periods of high inflation, and success in times of financial crises have provided many advantages.
Precious metals are not the only way to diversify your investment portfolio; their unique ability to hedge against inflation and recession while continuing steady gains makes them invaluable.
These five financial resolutions can help you review your investments and better position yourself for building wealth in the financial future. Make sure you aren’t living in any credit card debt!
