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Do you remember any of the New Year's
resolutions you made for 2005? If you do
not, it may not be such a tragedy. After
all, you still may have had a good
quality of life even if you did not get
to the gym three times a week, learn a
new language or take that gourmet
cooking class. On the other hand, you
can make a big difference in your future
if you make and keep financial
resolutions for the coming year.
Like all resolutions, the financial ones
are easier to keep if they do not force
you to radically change your lifestyle.
So, with that in mind, here are a few
achievable financial resolutions you may
want to consider for 2006:
Increase your 401(k) contributions.
If your salary goes up this year,
increase the percentage of your earnings
that you defer into your 401(k). With
tax-deferred growth, pre-tax
contributions and a variety of
investment choices, your 401(k) is one
of the best retirement-savings vehicles
around. Plus, since the money is taken
out before it even reaches your check,
you won't really miss your increased
contribution.
Max out your IRA.
In 2006, you can put in up to $4,000 to
a traditional or Roth IRA, or $5,000 if
you are 50 or older. If you cannot come
up with the maximum amount at once, try
dividing your IRA contributions into 12
equal monthly payments and having the
money taken automatically from a
checking or savings account.
Pay down your credit card debt.
As you may know, the Federal Reserve
raised short-term interest rates 12
straight times from June 2004 through
November 2005. Sooner or later, and
probably sooner, these rate increases
will affect interest rates charged by
credit card providers. So, if you are
paying a variable rate on your credit
cards, be prepared to pay more in
interest. These interest payments do you
no good, as you cannot deduct them from
your taxes; consequently, you will want
to pay down this debt as quickly as you
can.
Review your investment portfolio.
It is a good idea to review your
investment portfolio at least once a
year. Over the course of 12 months, your
life can change in many ways; e.g., new
spouse, new house, new child, new job,
etc. And if your life changes
significantly, your investment goals may
also change. But even if your
circumstances haven't changed much in a
year, you should review your holdings to
make sure they are properly diversified
in a way that reflects your individual
risk tolerance, time horizon and
long-term objectives. A financial
professional can help you review your
investments to make sure you are still
on track.
Avoid last year's mistakes.
Everyone makes investment mistakes - but
the smartest investors only make them
once. So, try to identify any errors you
made in 2005. Did you chase after "hot
stocks" only to find they had already
cooled off by the time you purchased
them? Did you incur a large tax bill by
constantly buying and selling
investments? These are the types of
mistakes you should seek to avoid in
2006.
There you have them: some New Year's
financial resolutions that, if followed
carefully, can provide you with benefits
long after 2006 is over. |
