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Once
again you need to make New Year's
resolutions. If you can succeed in your
efforts to exercise more, travel, learn
a new language or any of the other
worthy goals you might have, you can
expand your horizons and enjoy a better
quality of life. But if you want to make
an even bigger impact on your future,
you may want to make, and keep,
financial resolutions for the coming
year.
As with all resolutions, the
financial ones are easier to keep if
they do not force you to drastically
change your lifestyle. So, with that in
mind, here are a few attainable
financial resolutions to consider for
2007:
-
Increase your retirement plan
contributions. If your salary goes
up this year, increase the
percentage of your earnings that you
defer into your 401(k) plan (or your
403(b), if you work for a non-profit
agency or 457(b) if you work for a
state, county, city or other
governmental agency). With
tax-deferred growth, pre-tax
contributions and a variety of
investment choices, these plans are
great retirement savings vehicles.
Plus, since the money is taken out
before it even reaches your check,
you will not miss your increased
payments. And in 2007, the
contribution limit for these plans
has increased to $15,500. (If you
are 50 or older, you can contribute
an additional $5,000.)
-
Max out on your IRA. In 2007, you
can put up to $4,000 into 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 have the money
taken automatically from a checking
or savings account.
-
Build adequate cash reserves. Try to
build a sufficient cash cushion –
about six to 12 months' worth of
living expenses – to handle any
unexpected financial needs, such as
a major car repair or an expensive
new appliance. By building an
emergency fund, you will not need to
tap into your investments. And by
giving your investments the
potential to grow as long as
possible, you will accelerate your
chances for progress toward your
long-term financial goals.
-
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 have
not changed much in a year, you
should review your holdings to make
sure your investment mix 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.
-
Do not take a time out from
investing. In every year, you can
find any number of events – war,
political turmoil, natural
disasters, market volatility, etc. –
that might motivate you to "take a
break" from investing. But the most
successful investors keep on
investing, no matter how gloomy the
news may be. Look beyond the
headlines. Instead, focus on quality
investments and your long-term
investment strategies.
If you can achieve these New
Year's resolutions, you will go a long
way toward potentially improving your
financial situation in 2007 and beyond.
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