Becoming financially fit in the New Year
Provided by RBC Wealth Management
and Dave Dupont
As the calendar flipped from 2014 to 2015 many Americans made 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. 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 — Review end-of-year credit card statements and bills. 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.
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 1 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.
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.
Set up an emergency or opportunity account — We’ve all heard we should save for a rainy day. But, saving for a rainy day doesn’t always mean an emergency. 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 — The Health Industry Association of America states that during the course of your career, you are three and one-half times more likely to be injured and need disability coverage than you are to die and need life insurance. With advancements in medicine, diseases that once used to kill people now disable them, 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.
The information included in this article is not intended to be used as the primary basis for making investment decisions.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC