It's mid-January. How are those 2019 New Year's Resolutions going?
If the answer is not so well, we are here to tell you it is not too late! Even if you were not thinking about saving and investing when the clock struck midnight on New Year's Eve, the time has not past to hit the rest button on 2019, and set fresh financial goals, from strengthening your savings to cutting back on pesky fees and charges.
Make 2019 your strongest financial year yet with these six tips.
1. Evaluate Your Spending Plan or Budget
Having a budget—call it a spending plan if you like—is fundamental to your financial health. Those with a budget are more likely to spend less than their income, and considerably more likely to have set aside emergency funds, according to the FINRA Investor Education Foundation's National Financial Capability Study. Unfortunately, only 56 percent of participants in the most recent survey said they have a household budget and only 46 percent reported having a rainy day fund in case of an emergency.
Even if you are one of those who does already have a budget, take this chance to reevaluate. Has your financial situation changed? Are there any new expenses to incorporate into the plan? Are you expecting a raise?
In either case, create—and stick to—your budget in 2019 with these seven steps. And don't wait to start an emergency savings fund. Start small with just a few dollars a week, and you will be amazed what you have saved by next year.
2. Set New Goals
The start of a new year is a good time to reflect on how far you've come toward meeting your savings goals—and to celebrate your accomplishments—before setting new goals for the year ahead. While this is good for your financial health, it can also benefit you in other ways, as well. Take a minute to see how much you actually put in a 401(k) or IRA in 2018. Is there room to boost your retirement saving in 2019? Now, while the year is still young and perhaps a raise or bonus is kicking in, is a good time to add to your nest egg.
Savers who report working toward long-term goals are much more likely than those who do not to: (1) be satisfied with their personal finances, (2) spend less of their income, (3) have no difficulty making ends meet, and (4) have set aside emergency funds, according to the FINRA Foundation's study.
But be sure that your financial plan includes both short-term and long-term goals. Short-term goals help to prevent your long-term goals from feeling overwhelming. Here are more tips on setting a timeframe for your financial goals.
3. Check Your Credit Report
Your credit score can impact nearly every aspect of your financial life, from how much interest you pay on your car loan or mortgage to the size of your credit line on a new credit card, the size of your security deposit for your apartment and even if you get that job you are aiming for.
At its most basic, your credit score—a number typically ranging from 300 to 850 that is mathematically derived from your credit history—is used to predict how likely you are to pay back a loan on time. While that number is important, what should matter most to you is what goes into it: your credit report.
Take this opportunity to check out AnnualCreditReport.com, the only resource authorized by federal law to provide free credit reports from each of the three major credit bureaus—Equifax, TransUnion and Experian. You can request one report from each of the credit bureaus—for FREE—once every 12 months.
Want to learn more about what helps and hurts your credit? Read this.
4. Rebalance Your Portfolio
As the year comes to a close and you check the performance of your investments, you will likely find that your investment mix shifted throughout the year. If so, now might be a good time to rebalance.
When you rebalance, you restore the asset allocation in your portfolio—the portion of your total portfolio you invest in different asset classes, like stocks, bonds, and cash or cash equivalents—to your original target, or adjust it to an allocation that best fits any revision you may have made to your investment objectives. The goal is to maintain your desired risk level, assuming your objectives have not changed, and to keep your portfolio diversified.
From an emotional perspective, rebalancing isn't an easy thing to do. You might not feel so great about selling securities that are doing well or about investing more in an asset class that has flagged. But just because an investment or an investment class performed well in the past, doesn't mean it will do well going forward. Stocks, in particular, can be volatile.
It might feel counterintuitive to sell something that is doing well and buy something performing not as well. But you'll be in good shape if that laggard starts to rally in the future. Here's a look at everything you need to know about rebalancing—including the potential cost of shifting—and three approaches to doing so.
5. Zero In on Fees
Investing comes with fees. It's a fact of life. And while we can't control future fund performance or each and every fee and charge associated with our investment products, you can take steps to manage the costs of your investments. When a one-percent difference in fees can add up to tens of thousands of dollars over 20 years, it's worth your time to take a deep dive into what you are currently paying in fees, and to comparison shop to see if cheaper options are available.
Don't know where to get started? Check out FINRA's Fund Analyzer tool. It can help you understand the impact of fees and potential discounts on more than 30,000 mutual funds, ETFs, exchange-traded notes and money market funds. The tool enables you to run a wide variety of investment scenarios and to calculate how a fund's fees, expenses and discounts impact the value of a fund over time.
6. Free Yourself of Financial Clutter
Bills, mortgages, bank statements, brokerage statements, credit card statements—being an adult certainly does require a lot of paperwork. To keep your paper trail under control, it's important to develop a well-organized document-retention process, and to "clean house" from time to time with a good shredding session.
It's a good idea to get yourself reorganized at least once a year, and to purge any unnecessary old bills or receipts. Bonus: if you take this step now, you'll be well prepared come tax season.
Here is a guide for how long you should keep different kinds of financial records before putting them through the shredder.
Subscribe to FINRA's The Alert Investor newsletter for more information about saving and investing.