New Year, New Financial Plans

Monday, December 5, 2016

If you’re like most people, you are too frazzled by the end-of-the-year holiday frenzy to make solid New Year’s Resolutions that will really move you toward your life goals. Yet there are people who manage to make – and, more importantly, keep – their New Year’s Resolutions. If you want to make some important changes to your finances in 2017, set aside a few minutes to outline steps you can take to begin making progress on your goals.

Start with some specific savings goal

Vowing to “save more” sounds great, but you also need at least a rough estimate of your income and how you spend your money before you can create a savings plan.

If building up an emergency fund is your main goal for the year, set up an automatic transfer from every paycheck into a savings account or a money market account. Financial experts recommend at least 10% if possible. You can always start with something a little smaller and then reevaluate in a couple of months.

If you want to save for a vacation or a down payment for a house, estimate how much you’ll need and when and then break that down into a monthly, weekly and even daily savings goal. Apps such as Mint.com can help organize your finances and meet your goals.

Eliminate your debt

If your goal is to once-and-for-all get rid of your credit card balance, you’ll need to do a simple, but possibly painful exercise: add up every credit bill, write down the interest rate and the minimum payment. Online calculators at sites such as Bankrate.com can tell you how much you need to pay each month to pay off a bill in full by a certain date.

You can tackle your debts either by smallest to largest for a psychological boost or by eliminating the one with the highest interest rate first to reduce your interest costs. The “snowball” approach works for many people: pay the minimum on each debt except for the one you are tackling first – and then pour every dollar you can into paying off that one. Once that’s done, take that payment plus the minimum you were paying on the next one and add them together until that debt is paid as well.

Get ready for homeownership

If you’d like to buy a house this year, then start by requesting your credit reports from all three credit reporting bureaus at www.annualcreditreport.com. Check for errors and, if there are negative comments, see what you can do to boost your score. You should also visit a lender to find out how much you can be approved to borrow. Start a solid savings plan and look into homeownership resources at www.downpaymentresources.com.

Get ready to sell your house

If you plan to sell your home in 2017, start prepping your house by fixing up the small things that need touching up or repairs and giving it a deep cleaning. Interview listing agents and listen to their suggestions about making your house more appealing as well as their marketing plans. Educate yourself about the local market so you have a better feel for your home’s value.

Refinance your home

Mortgage rates may rise in 2017. Contact your current lender and shop around with one or two others to see if you can benefit from a new loan. You may want to consider a shorter loan term if you’ve been paying your mortgage for a few years, since the balance is lower.

Plan for an expanded family

If you’re planning for your first baby or for additional children, evaluate your household budget and look into childcare options. Decide if you need to move or can stay where you are with a larger family.

Don’t forget to check out your health insurance coverage and your employer’s maternity and paternity leave policies so you’re prepared when the baby arrives.

This is also the time to look into life insurance if you don’t already have it and to update beneficiaries on your accounts and even create a will and other estate-planning documents.

Plan for college tuition

Even if your kids are still in diapers, it’s time to establish a college savings plan. If you have kids in high school, start looking into colleges and their financial aid packages. Your kids should start searching for scholarships to help offset the cost of tuition.

If you have a student starting college in 2017, fill out the Free Application for Federal Student Aid (FAFSA) as soon as possible and work with college financial aid offices to identify potential scholarships and grant assistance. FAFSA for 2017-18 is already online.

Prepare for retirement

Depending on your age, it may be time to consult a financial advisor to talk about your retirement plans. Get information from Social Security about your predicted benefits by creating an account online, check on your 401k and IRA contributions and start thinking about when you want to retire and where you’d like to live.

Do an insurance review

One more way to get financially ready for a new year is to do an insurance review. You can work with your insurance agent or just pull out your policies and see if you have adequate coverage or perhaps can save on the premiums with a new policy. Check out an umbrella policy, an inexpensive plan that adds liability protection to your car and home insurance. If you’re middle-aged, find out if long-term care insurance is something you could need for future financial security.

Michele Lerner is a freelance writer with more than twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her work has appeared in The Washington Post,  NewHomeSource.com, Realtor.com, Bankrate.com, Insurance.com, HSH.com, The Washington Times, NAREIT's Real Estate Portfolio, and numerous Realtor association publications. Her latest book, "New Home 101: Your Guide to Buying and Building a New Home" and her first book, "HOMEBUYING: Tough Times, First Time, Any Time" are available now at Amazon.com or from MicheleLerner.com.