Financial Resolutions for 2017
It's amazing how powerful the turn of the calendar can be. New
Year's resolutions dominate the landscape with all of the weight loss programs
and workout products at the top of the list. I've never been a huge
probably since there's just too much I need to change and it's a little
But each year, I may pick one single project or thing that needs to get done
and is manageable. Last year, my goal was to spend five consecutive weeknights
at home (by 5pm) with my family. Between coaching my kids' teams and their
activities, I was unable to accomplish that. That will happen in 2017 plus a
new goal on the business side.
1 - Take a financial inventory of your current holdings
Make a list of all accounts and holdings on a piece of paper or Excel
spreadsheet of their values at the end of 2016 and 15 (and as far back as you
have data). Compute the return from one year to the next. Using 2007 - 2016
should give you a good cross section of market environments with strong up
years like 2013, a strong down year, 2008, and a number of strongly volatile
and very average years.
Determine the composition of your portfolio: What percent is in stocks, bonds,
currencies, commodities, cash, etc.? Try to understand why something did better
or worse than expected and consider adding or withdrawing where appropriate. Remember,
the most successful investors are the ones who add to their best investments
after they experience a challenging period. Make sure you understand what you
own and why!
2 - Photograph
inventory of your home
With modern technology, it's never been easier to take pictures
or record video. Start on the outside and make sure to capture anything and
everything than can be lost due to fire, storm or theft. You, your insurance
company and the authorities will be happy you did.
3 - Organize key
Should tragedy strike your family, make sure that all important
documents can easily be located and used by other family members, lawyers or
the executor. These documents include but are not limited to will, power of
attorney, bank, brokerage and 401K accounts, insurance, mortgage, deeds, etc.
4 - Create/update will
More than half of all Americans die without a will. That is one
amazing statistic. Most reason that they just haven't gotten around to having
one done. Laws vary by state as to exactly what happens if you without a will.
With estate laws about to change again, there are a variety of reasons to have
an updated will. First, you are able to decide exactly what share of your
estate and what property goes to which individuals. Otherwise, and especially
if there have been more than one spouse and multiple children from those
spouses, the different parties will spend a lot of money and time fighting over
the assets. If you don't have an attorney or don't want to pay one, at least
buy the software and do it yourself.
5 - Update beneficiaries
Retirement accounts like IRAs, 401Ks and annuities have
beneficiaries. That is, a person, people or entities you want to receive those
assets after your passing. Make sure your beneficiaries are still alive and you
still want them to receive that predetermined portion. Many times
beneficiaries' family status changes and account owners no longer want them to
receive all or any of their account. Additionally, accounts grow in different
ways and significant growth of an account may skew the intended gift.
6 - Check credit report
There are several services that offer to supply your credit
report on an annual basis for free. Make sure to check all three credit
bureaus. Identity theft and credit fraud have become pervasive this decade and
it takes a very long time to correct problems. If you see a negative mark on
your credit, even a small one, make sure to address it until it has been fixed.
It may take a while. Additionally, make sure to close any and all accounts and
cards not currently being used as they can negatively impact your credit.
7 - Create a budget
If you notice, I didn't say to live by a budget, just to create
one. That's the hardest step to take, the first one. Simply either keep track
of everything you spend or for a few dollars, purchase a program like Quicken
to track it for you. You will be amazed how your money gets spent over the
course of the year.
8 - Pay down/off high
interest rate credit card debt
This should be the most obvious tip as the higher the interest
rate, the more difficult it is to pay off. With the Federal Reserve raising short-term
interest rates in December and likely to raise a few more times in 2017, just
paying the monthly minimum will take you decades to pay off your debt. That is
among the worst mistakes you can make. Whatever it takes, even at the expense
of retirement plan contributions, you absolutely must pay down and then off
high interest rate credit card debt.
9 - Consolidate debt
Credit card companies are thirsting for new business and luring
customers with all kinds of 0% interest rate and free transfer offers. Whether
or not you can pay off/down your credit card debt, you should definitely
consolidate as many of your credit cards with balances as possible at
preferably 0% interest.
10 - Refinance your
The 35-year bull market in bonds ended in July 2016. With the
bond market running in 30-40 year cycles, the odds greatly favor that long-term
interest rates, not the ones the Federal Reserve sets, will be rising for the
next few decades on balance. Long-term mortgages key off the 10 year treasury
note which has already rallied 100% from its 2016 bottom. If you haven't
already refinanced your mortgage when interest rates were at record lows, use
any weakness seen during the first four months of 2017 to refinance.
11 –Establish an emergency
Working people should have an emergency fund of at least 3-6
months of expenses in case an unexpected event occurs, like losing your job.
This fund should be very liquid and easily accessed. If you are single and in
your 20s, you can probably get away with a smaller fund. The older you are and
the more people who depend on you means the fund should be larger. Having
available credit on a credit card is not an acceptable emergency fund.
12 - Rebalance 401K and
other investment accounts
While I advocate rebalancing quarterly, most investors,
especially those who do not work with a financial advisor, do not even do this
annually. This is vital for long-term success. Let's say your 401K account is
allocated 70% to equities and 30% to fixed income. Over the course of every
year, stocks and bonds perform differently and that allocation has likely
changed, sometimes dramatically. Rebalancing sets that account back to the
70/30 or whatever you chosen allocation is.
13 - Increase 401K or
other retirement plan contributions
For the vast majority of Americans, employer sponsored
retirement plans are the best form of saving for retirement. With old
fashioned, traditional pension plans going the way of the rotary dial phone,
many people are offered 401K plans with some employers giving certain
contribution matches. Participants should strongly consider raising their
contribution percentage until it is maxed out, even if that means just a few
dollars a week.
For 2017, the maximum 401K contribution is $18,000 for
individuals under the age of 50. For those over the age of 50, the IRS allows
an additional $6,000 catch up provision. For IRAs, the maximum contribution is
$5,500 for those under 50 with an additional $500 catch up provision for those
14 - Sell winners
In my Top Financial Tips to Year-End
suggested that investors should hold off selling their winning positions as
there was a good chance that capital gains taxes would be cut in 2017. With the
calendar turned and a tax cut likely to be seen in the second half of the year,
but retroactive to January 1st, investors with taxable gains who
were looking to sell in 2016 should now consider selling with the prospect of
lower capital gains taxes.
15 - Understand exactly
what your health insurance covers
This is not your parents' old health insurance coverage! There
is no more blanket coverage. Deductibles are very high. Copays are high. There
is in network, out of network, coinsurance, urgent care, emergency room, etc.
With the ObamaCare exchanges failing and premiums skyrocketing, insurance
companies are not going to absorb the cost. You are! Don't wait until your
family gets a negative surprise to understand the coverage you have and don't
BONUS - Travel to Europe
It was only 9 years ago when supermodel Gisele Bundchen demanded
to be paid in euros instead of dollars. Around that time, it cost $1.60 to buy
one euro. I vividly remember doing several media interviews declaring that the
euro was peaking and a new, long-term, secular bull market in the dollar was in
its infancy. Since Gisele's embarrassingly poor call, the euro has collapsed
from 1.60 to 1.01, or 37%, making travel to mainland Europe the cheapest since
2002 and on its way to becoming even more affordable this decade.