11 Ways to Improve Your Finances in 2016

 Posted by Roger Johnson, CFP®, AIF®

1. Calculate your net worth and set goals for the New Year.​

Knowing your net worth is key towards growing it. Each year in January, tally your current assets and liabilities to figure out your current net worth, then work on building it from there. Make sure you have a 3 to 6 month emergency fund before you get too involved with anything else.

2. Manage household finances better.​

Separate your 2015 receipts before they get mixed in with 2016’s. Money can get more complicated as your family grows, so track down where your dollars are going. Using a Home Budgeting app can make it easier to pull together your expenditures. Ask you spouse for help on this… it’s a team effort so play nice!

3. Check up on your insurance policies.​

Life insurance is not particularly fun to talk about or pay for but vitally necessary to safeguard your family if they depend on your income. Load up on TERM insurance in your working years. “Cash Value” insurance is usually too expensive for the coverage you need. Reviewing your policies once a year to make sure they are in good standing and that you have enough coverage.  Don’t forget to buy long-term and short-term disability since you are more likely to become disabled than die young.

4. Guard against identity theft.

One of the most common online identity theft methods is for an attacker to send an email with a hyperlink that leads victims to an official-looking site that requests personal information. People can be fooled into sharing their names, addresses, credit card numbers and even Social Security numbers this way. To keep yourself safe, avoid clicking on unfamiliar URLs sent to you via email, even if at first glance they appear to be from your bank or a retailer. Monitor each of your three credit reports for free each year at annualcreditreport.com. Check a different site every 4 months.

5. Get more out of your workplace benefits.

If you’re lucky enough to have a job with benefits, then it pays to make sure you’re getting as much out of them as possible.  Look for a 401k match, maybe a HSA account and a stock purchase plan. Health insurance, term life insurance and disability insurance may also be available and can help protect your finances over time. 

6. Rebalance your investments regularly.​

If you invest too conservatively, then your money might not keep up with inflation. Meanwhile, if you are overly aggressive, swings in the market could lead to a loss of asset value at an inconvenient time, like shortly before retirement. Review your portfolio at least once a year to make sure you have the right mix for you; a financial advisor can also help.

7. Spend less on food and clothing.

Food might be one constant in our budgets, but there are still ways to trim those costs. Buying in bulk, cooking at home as much as possible and​ cooking meals that can be stored in the freezer for later are among the smart strategies. By planning meals and keeping perishable items visible at the front of your fridge, you can also help minimize waste.

8. Pay off expensive debt and improve your credit score.

If you’re still carrying around expensive debt in the form of credit card debt or other loans, then it’s time to make a plan to pay it off. In “The Debt Escape Plan,” author Beverly Harzog suggests doing just that by setting specific targets for yourself (for example, pay off one credit card by April) and getting the support you need in the form of a credit counselor if necessary. You might also want to look for ways to scale back spending while simultaneously earning more money, which can then be put toward the debt.

9. Max out your retirement savings.​

If you didn’t meet your retirement savings goals in 2015, then you’ll want to be sure to do so in 2016. If you have access to a 401(k) through work, then you can set it up to automatically deduct a certain percentage from your paycheck. Otherwise, you can check on your eligibility for an IRA account.

10. Prepare your finances for natural (and man-made) disasters.​

A bad storm or power outage can leave your financial life in disarray. To prepare for any kind of unexpected disaster, you can come up with a plan for alternate housing, prepare an emergency kit and keep nonperishable food on hand. If you don’t have access to heat or running water, you’ll want to make sure you can still keep your family fed.

11. Reflect on your money beliefs.​

Sometimes, building your wealth has to start by confronting deep-seated fears and beliefs around money. Perhaps your upbringing led you to believe that saving is not a priority or you don’t deserve to have a big bank account, so you sabotage yourself with actions that ultimately hurt your finances. Exploring those long-held beliefs and mastering hem can help you make smarter money decisions for the rest of your life.

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