The news is filled with stories about 2012 predictions, resolutions, and the like, so I felt compelled to chime in. Here are five financial resolutions to consider for 2012.
Get a financial plan in place. A properly constructed financial plan analyzes your current situation, helps you establish financial goals, provides benchmarks against which to gauge your progress, and includes implementation suggestions. If you don’t know where you are headed and don’t have a strategy to get there, it’s less likely that you will end up at the financial destination you desire.
Take full advantage of your company retirement plan. To the extent that you are able, max out your 401(k) contributions for 2012 ($17,000; $22,500 if you are 50 or over in 2012). If you can’t afford the maximum contribution, try to contribute at least enough to get your company’s full matching contribution if one is offered. One way to painlessly increase your contributions is to take any percentage salary increase you receive each year and increase your retirement plan contribution by that percentage. Your retirement plan may not be perfect, but it does offer a vehicle to save for retirement on a regular basis, and over time a properly managed account can grow into a significant retirement asset.
De-clutter your financial life. Consolidate all of those old 401(k) plans and IRAs into a couple of accounts. Take a look at your spending and get a handle on where your money is going. Make sure that your beneficiary designations on retirement plans, IRAs, insurance policies, and annuities are up to date. In general, simplify things to make monitoring your financial situation as easy as possible.
Control what you can, and ignore all of the media hype about the markets. What you can control is how much you save and how you allocate those investments. You can’t control what the markets and the economy might do in 2012. I’m not advocating that you shut yourself off from the financial media. I am merely suggesting that you step back and rely on your financial planning and investment strategy during periods of market turmoil. It is generally a bad idea to overreact to the crises of the day.
Hire professional help if you need it. Many very capable people don’t do a good job with their finances for many reasons, such as a lack of time. Find a good fee-only financial adviser to provide the help you need, whether it’s just one time or on an ongoing basis.
I hope that everyone has a very Happy New Year and a prosperous 2012.
Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. He recently cofounded Retirement Fiduciary Advisors to provide direct investment and retirement planning advice to 401(k) plan participants. Follow Roger on Twitter and LinkedIn. Roger also blogs at Chicago Financial Planner.