The New Year offers the opportunity to start fresh.
I decided to start 2017 with a clean slate and let me tell you what happened.
I deleted about 10,000 emails yesterday...that's right, thousands of cluttery emails -- all the newsletters, mailing lists and advertisements are definitely not something I opted in to but evidently need to take the time to opt out of. The calendar alerts, school and activities communications and the confirmations that come through email create a neverending onslaught of digital missives.
Opting Out is really an Act of Culling
In life we often go along with the flow. The schedules, reminders, sales, suggestions, opportunities, rants, petitions, invitations and sign-ups... they just comes at us like waves again and again. Like me you probably respond to the waves as best you can. But waters can still, storms can spin up without warning and a myriad of obstacles can cross our paths.
It is crucial to remove oneself from the swirling waters and get out onto the beach and take a fresh perspective.
We need to schedule time to do important things (exercising, meditating, cooking, reading, playing music, writing that letter, sending the package finally, etc.) or, let's face it--these things won't happen. I recommend scheduling time to review your financial life and setting up your 2017 financial strategy so no matter what comes at you this year, you make progress in some focused areas.
The New Year is an opportunity to set some goals and also to begin learning new habits. Here are a few simple ideas of how you could improve your financial picture:
1. Automate Contributions to Make Saving Easier
Committing yourself to investing a set amount every month or quarter is a good step if you're behind on saving for retirement. Procrastination gets the best of us and paying yourself first is a good way to nip that in the bud. Setting up an auto transfer into an IRA or 401k or even in a non-retirement investment account is a good habit. It also happens to work well due to a concept called "Dollar Cost Averaging." Here is an example of how it can benefit you to make more frequent contributions.
Dollar Cost Averaging into Apple Stock
|Date Invested||Amount Invested||Opening Share Price||Number of Shares Purchased|
|January 4th, 2016||$500||$102.61||4.87|
|April 1, 2016||$500||$108.78||4.59|
|July 5, 2016||$500||$95.39||5.24|
|October 3, 2016||$500||$112.71||4.43|
|December 30, 2016||$500||$116.65||4.28|
|Total Invested:||$2500||$107.23 Average Share Price Paid||23.41 Total Shares|
|Total Value 12/30:||$2711||$115.82 Dec. 30 Closing Price||8.4% ROI|
|Dollar Cost Average||Summary: The stock price fluctuates throughout the year but you consistently put the same amount in to get a lower average cost per share. You get more shares when the price is low. You get fewer shares when the price is high.|
2. Consolidate Accounts to Save on Charges & Fees
Rolling over a 401k or two to consolidate may be helpful if you've accrued multiple accounts of the same type. If you're paying annual charges on multiple IRA's, rolling them all in together can reduce expenses. It takes time to review and evaluate the most suitable place and fashion to invest the money. Seek professional guidance if you're not sure. Shop around and ask a lot of questions. There are many financial products out there and some advisors sell the same thing to everyone. It may not always be the best for you, though.
3. Max Out Your IRA Contributions
You have until April 15th to contribute for the prior year within your IRA's so look at your taxable income and see which location makes the most sense for you. Check with your advisor or CPA to verify the amount you can contribute based on your household's unique characteristics. IRA rules are complicated so have someone double-check your work to be safe. Penalties and reversals of contributions are best to be avoided. The immediate and long term benefits of utilizing IRA's is well worth the time to investigate doing it correctly each year.
4. Check! Check! Check it Off the Financial To-Do List!
I'm a huge fan of checklists. I tend to hop from task to task and my checklist helps keep me focused during my day. Setting up a financial checklist for the coming year also helps me stay on track even when life gets crazy.
Pick at least one to three goals that you are serious about checking off your Financial To-Do List this year. Just like strength training, you'll be in better shape and able to do even harder training the next year. Rome wasn't built in a day. Periodization of the work by breaking it down into smaller steps month by month and year by year will move you toward your goals without breaking too much of a sweat.
If you need guidance or motivation in setting up your plan for the year, schedule an appointment.