Everyone makes a new year’s resolution, be it losing a little weight or saving a few more dollars. Many of these fall through, but it’s important to stick to a financial plan, not just for a better today, but a better tomorrow as well.
Saving for the future is even more paramount as people get older, especially as retirement savings dwindle.
1. Make yourself accountable.
In order to have a financial plan and plan for a better future, it’s important to hold yourself accountable, whether it’s to a spouse, a financial advisor or someone you trust.
2. Write down goals.
Writing down a set of goals — whether saving for a new house or helping fund a loved one’s education — and an encompassing list of assets, worries and challenges will help make the goal easier to reach.
3. Check risk tolerance and diversify.
As people get older, their risk tolerance tends to get more conservative. It’s important to keep your assets and investments in-line with your risk profile and whether that may alter your goals.
Historically, there’s been around a 6% return from bonds, but with inflation likely to rise significantly over the next few years, those returns could be cut in half, Lutts noted.
It’s also important that if certain investments have outperformed, it may be best to pare back some of these so they don’t overtake the portfolio and put some of the excess returns into other investments.
4. Taxes, taxes, taxes.
Taxes are a component that often get overlooked but can have a huge impact on financial goals if they’re not properly managed.
If your tax situation has changed because you’re getting a large bonus, there are ways to mitigate that.
5. Estate planning.
Setting up your estate is the ultimate end-goal and it can be a good way to see if goals need to be shifted. If you’re gifting assets, you may want to give that a good look over and see if you accomplished your goals or if they need to be tweaked.