Provided by RBC Wealth Management and Thomas J. Powers
As the calendar flips to 2020, many Americans are making New Year’s resolutions. If you are like most, your resolutions concern your physical health – eat better, exercise more, stop smoking or drinking, lose weight. But, while improving your physical health, don’t forget to take a look at your financial health. Just like with physical fitness, small changes can make a big difference.
Review last year’s spending and savings to make a realistic budget – In order to change the future you need to know where you’ve been. Review end-of-year credit card statements and bills. This will give you an accurate snapshot of where your money is going each month. You may even find opportunities to save on things like the cable bill or cell phone service. In addition, don’t forget to review end-of-year statements from your investment and benefit accounts to fully understand your income stream. Once you know your true financial picture, make a realistic budget and stick to it.
Start saving or increase your savings for retirement – If your employer has a 401(k), invest at least enough to get the match, if available. If not, contribute to an IRA. If you already contribute, consider raising your contribution by one percent. You aren’t likely to notice the difference now but the compounded interest you gain with this small increased investment will be a big boost to your retirement savings over time. Or, consider taking a look at the advantages of a Roth IRA. This retirement investment vehicle provides tax benefits while allowing you to make contributions up to April 15th.
Invest in your children’s future – College costs are increasing faster than the cost of living. But there is good news; early investing means compounded interest over time. So, the money you invest when your child is born will be worth much more when they are preparing to go off to college. But, saving for your children’s future education doesn’t mean skimping on your retirement savings. Remember, you can get loans for college but you can’t get a loan for retirement.
Set up an emergency or opportunity account – We’ve all heard that we should save for a rainy day. But, saving for a rainy day doesn’t always mean an emergency. That rainy day may be literal and you’ve found a great deal to escape for a beach vacation. Rather than letting the opportunity pass or accruing more credit card debt wouldn’t it be nice to have a nest egg you can tap? Consider setting up or increasing deductions into an investment or savings account. The money will be there for the unexpected life event or opportunity that comes your way.
Look at insurance coverage, including disability and long-term care – Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” However, according to the Health Industry Association of America, during the course of your career, you are three and a half times more likely to be injured and need disability coverage than you are to die and need life insurance. With advancements in medicine, many previously life threatening diseases now disable rather than kill patients, requiring sustained healthcare needs. These are expensive and can quickly deplete savings. Consider making an investment in your future healthcare needs by purchasing disability and long-term care insurance.
No one has time to become an expert in everything. Just as you might seek a personal trainer to help you lose weight, you should consider hiring a financial professional who can help you meet your financial goals. Taking control of your finances means you just may have enough savings to afford that gym membership to help with your other resolution, getting in shape.
This article is provided by RBC Wealth Management on behalf of Thomas J. Powers, a Financial Advisor at RBC Wealth Management, and may not be exclusive to this publication. The information included in this article is not intended to be used as the primary basis for making investment decisions. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance.
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