The start of a new year — what a great time to set up yourself for success! We often think about getting in physical shape, but it’s equally important to get yourself into good financial shape. Just as you change your habits and routines regarding diet and physical activity, now is the time to adjust some of your financial activities to create a new and better you for 2016.
- Give yourself a raise: pay yourself first! As with your physical well-being, it’s important to make your financial health a priority. One way to do this is to save more. It doesn’t have to be extravagant — just 1% more in your savings or retirement plan. The easiest way: automate. Take the funds right out of your payroll check. (You won't notice.)
- Pay your debts. If you have credit card or any kind of consumer debt, develop a plan to pay it off. Prioritize your pay-offs by interest rate: higher interest-rate loans and credit cards get paid first. This also requires less use of your credit cards. Use other forms of payment such as debit cards, or cash. (Yes, you can still use cash in some places!)
- Review or set up your estate plan. Do you have a trust in place? If not, get one. As part of the trust, you’ll need to complete a will. A will provides instructions for after your death: who will be the executor of your estate, who will be guardians for your children, how property will be distributed, etc. If you don’t have a trust, chances are good that your assets will have to go through probate and be distributed based on state law — your wishes will not be taken into account. (Also note: probate is a public legal process with unavoidable court-dictated fees. Ouch!) Your trust can also include a health directive: this document outlines your health care wishes in case you become incapacitated and cannot make health decisions for yourself.
- Set up and use your Flexible Spending Account (FSA). It’s the beginning of the year and you probably have deductibles to meet for your health plan. Don’t fret. Start using your FSA now. Don’t wait until the end of the year. It will help you manage your cash flow because there will be fewer out-of-pocket expenses.
- See a financial advisor. Do you get an annual physical exam? Chances are you do, and your doctor lets you know how you’re doing. Guess what? A financial advisor can do the same thing for your financial health. She’ll provide advice and clarity to your personal goals. Your retirement, educational plans for your children, vacation, charitable giving, investing — all these scenarios work best with a plan. A financial advisor can not only help you put a plan in place but also check to make sure you’re on track. She’ll make recommendations and provide tools to help you be successful, and, of course, monitor your progress. Do yourself a favor by making this a part of your annual ritual and have a financial check-up!