Financial Planning | January 3, 2018

4 Useful Financial Resolutions for 2018

by  Eric H. Rosenberg, GW & WADE PRINCIPAL

Now that 2018 is here, it’s time to start thinking about your financial resolutions.

Financial reflection is certainly not limited to January. Still, it is a popular time when life slows down from the bustle of the holidays and the early weeks of the new year, freeing you up to plan for the year to come. Committing to the following four resolutions will help to strengthen your 2018 financial situation.

Resolution #1 – Save More & Measure Progress

The most important step in establishing any savings goal is to ensure that it is measurable and achievable. To successfully save more, start with your budget first. The new year is an ideal time for this process, since you’ll have fresh year-end numbers as well as annual credit card statements that generally arrive by mid-January. To be conservative, base your 2018 financial projections on 2017 numbers. Rigorously review all 2017 expenses and ask yourself where you can cut back. Also, consider how your values and priorities may have changed, and how these differences impact your spending.

Simple Example:

There was a time when many professionals carried both personal and work mobile phones; I was one of them. I used to keep a mobile phone in my briefcase so family and friends could reach me. I left it in there for almost two years. I’m pretty certain that I didn’t receive even one text. At a cost of $91 per month, I threw away almost $2,200 in a two-year period. At one time, I must have felt compelled to carry a personal phone. But, family and work-life expectations change over time. Once I realized the seepage, I easily reallocated that money to savings.

As you define or enhance your annual budget, including target savings and anticipated expenses, be sure to clearly articulate and prioritize your savings goals and related personal values.

For Example:

What is more important to you, saving for retirement, education, a second home, a child’s wedding, extensive travel, etc.? Certainly, you can save for more than one thing at a time. However, without prioritizing your goals, you’ll often be left feeling as if you accomplished nothing.

Key Savings Tip

If you’re looking to save more, then start by paying off debt, including high-interest college loans and credit cards. Here is one step-by-step guide detailing ways to pay off debt while still saving[1].

Resolution #2 – Evaluate Career Goals

Reviewing your budget and savings can often lead to evaluating career goals.

Many people believe they can increase their income and, therefore, save more by changing jobs. Although this may be true, you should first revisit your current salary and complete benefits package. Ask yourself if there is additional opportunity with your current employer for either a promotion, an added bonus, or both.

Also, ask yourself the following questions when contemplating a job change:

  • Have you reached your company-sponsored 401(k) limit or stock option vesting periods? Is there a bonus arriving soon?
  • What are you earning now compared to the marketplace? Benchmark your income growth potential using salary research websites, such as the Indeed Salary[2] tracker.
  • Are your skills becoming antiquated, necessitating that you make a move in order to remain competitive?
  • How much more money should you earn in order to make a move to an unknown situation?

Resolution #3 – Shred & Delete Excess Financial Statements

If you’re able to switch from paper statements to digital, do it. By merely switching to digital statements, you reduce clutter in your life. Also, holding onto enormous amounts of financial statements is counterproductive, making it that much more difficult to have a clear picture of your financial situation. Other than maintaining your tax records for seven years, keep year-end financial statements, and shred or delete the rest. Limiting data points enhances your ability to measure progress.

Resolution #4 – Review Out-of-Sight Financial Strategies

It’s important to think about financial components in your life that you may not consider on a day-to-day basis. Here are five:

  1. Update Legal Documents – Spend time thinking about all of your legal documents, such as your will and other estate planning documents. Ask yourself basic questions. For example, is the executor (personal representative) of your will still emotionally and physically able to manage your estate?

  2. Benchmark Retirement Savings – How is your retirement savings plan coming together? Are you on target, have you rebalanced your portfolio? What does your tax situation look like in retirement? Does Social Security play a role and, if so, by how much?

  3. Review Employment-related Contracts – The start of each year is an excellent time to review any agreements you’ve signed in connection with your employment (for example, confidentiality or non-compete agreements) by asking yourself simple questions to ensure the contract still has value.

    For Example:
    Are you working on the weekends developing a new product, with the ultimate goal of leaving your employer? If so, are you sure that this intellectual property doesn’t belong to your employer?

  4. Conduct an Insurance Audit – At a minimum, be sure to review your life, disability, long-term care and auto and home insurance. For example, have you recently changed jobs and no longer have access to company-sponsored life and disability insurance? Can your family survive without your income, or do you need to backfill this insurance?

  5. Reevaluate Upsizing & Downsizing a Home – There are many myths surrounding the process of upsizing and downsizing a primary residence.

    For Example: 
    Many individuals believe they’d be happier if they were to purchase a larger home. However, this isn’t always true. In an insightful Psychology Today article, author Jim Taylor, Ph.D. tackles a key question: Will a New House Bring You Happiness?[3] He advocates that happiness doesn't come from our stuff, but the values that underlie our stuff and how it impacts the quality of our lives. In his article, Taylor offers two criteria to determine if a larger home will make you happier.

    On the flip side is downsizing. Many individuals believe that by downsizing their home, they’ll save money. Certainly, this can be true. However, there are hidden costs to consider. For example, a couple wishing to downsize from their $500,000 home to a $400,000 home so that they can reduce their living expenses and add $100,000 to their retirement savings may find that their actual savings are less than expected.

    How is this so? First of all, selling your house costs money. If you find a buyer willing to pay the $500,000 asking price, the sale will cost the seller approximately 6% ($30,000) in broker commissions and related closing costs. Your $500,000 quickly turns to $470,000. This does not even take into consideration any adjustments that may come up after the contract is drafted and the home inspection takes place.

    You also have to consider the cost of purchasing and moving to your new home. When you purchase your home, you will incur up front insurance, legal and recording fees. You will also likely hire a moving company. When you add these expenses up, you could easily spend several thousand more dollars before moving in. Additionally, you may wish to do renovations, improvements and decorating to adjust to your new home.

    At the end of the day, the number you actually deposit into your investment account may be significantly smaller than you originally thought.

    Primary home transactions tend not to be as financially efficient as you anticipate. Also, buying or selling a home often involves much more than just numbers, it can include aspirations, expectations and many other emotional drivers. It’s important to recognize what drives your decisions before making any substantial housing moves.

In Closing

If you don’t have full awareness of your financial situation, coupled with well-defined, measurable goals, then it’s unlikely you’ll meet your financial objectives. At GW & Wade, we encourage our clients to clearly define their goals. Our role is to reinforce these goals by building a financial plan that brings together all elements of an individual’s financial life, including estate, retirement and tax planning, as well as a plan that reflects an individual’s values. Everything needs to be looped together in order to create a strong and tax-efficient financial life.

If you have questions regarding your financial situation, please contact us. We welcome the opportunity to help you achieve your personal and financial aspirations.

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The information provided above is general in nature and is not intended to represent specific tax, investment or professional advice.  No client or prospective client should assume that the above information serves as the receipt of, or a substitute for, personalized individual advice from GW & Wade, LLC, which can only be provided through a formal advisory relationship.  

Clients of the firm who have specific questions should contact their GW & Wade Counselor. All other inquiries, including any inquiry concerning a potential advisory relationship with GW & Wade, should be directed to:

Laurie Wexler Gerber, Client Development

GW & Wade, LLC






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