“Even if you’re on the right track, you’ll get run over if you just sit there.”– Will Rogers
As 2023 draws to a close, you may be thinking ahead for ways to improve your life in 2024. And if you are like most people, you are planning to adopt a New Year’s resolution, despite the fact that most people rarely live up to the resolutions made in years past.
There are many reasons resolutions fail, but in our line of work the problem is often that they are too general or poorly defined. Resolving to “create a financial plan” or “get my finances in order” is not helpful, because these phrases can mean many different things and will take on different meanings as you move through life. You are much more likely to be successful if, instead of making a general resolution about finances, you set a smaller, more specific goal that is relevant to your current stage of life. Here, we have compiled our suggestions for New Year’s resolutions for each stage of financial life.
Recent high school and college grads:
- Build an emergency fund. Accumulate some cash to hold you over if you lose your job or face unexpected expenses.
- Start saving for retirement. Learn about the power of tax deductions and compound returns as you plan for the distant future.
- Reduce debt and build credit. Consider refinancing student loans or paying them down more aggressively. Understand the factors that determine your credit score, and reduce your high-interest debt as much as possible. (Note: Credit card debt can quickly spiral out of control.)
Young marrieds and new moms and dads:
- Learn about homebuying. Compare the terms of fixed and adjustable-rate mortgages, see how much money you would need to put down on each type of loan, and decide how much you can afford to pay for a house.
- Consider buying life insurance. Calculate how much life insurance your family may need, and research the various types of insurance policies.
- Plan for your kids’ education. Compare the benefits of the different state 529 and prepaid education plans. A lot of great opportunities exist.
Parents of teens:
- Plan for your kids’ education (again). Learn about public versus private colleges and universities, scholarship opportunities, student loans, and FAFSA applications. Is graduate school a consideration?
- Reassess your investments and risk tolerance. You may have accumulated significant investment assets at this point, so you should consider how to structure your portfolio and how much risk you are willing, and can afford, to take.
- Plan for retirement. You may be many years from retirement, but you should work with a financial planner to clarify your long-term financial goals and decide how to reach them. (Note: a goal without a plan is just a wish.)
- Create your estate plan. Speak to a qualified attorney about who will make health care and legal decisions for you if you are incapacitated and where you want your assets to go after you are gone.
- Craft a tax strategy. You are likely in your peak earning years, so work with your accountant on a plan to minimize your taxes both now and in retirement.
- Plan for the needs of aging parents. If you have parents who may need extra care, consider your options for financing their care, deciding where they will live, and exploring the facilities available. (Note: You should address these issues before your parents actually need care, rather than scrambling for a solution during a crisis.)
- Learn about Social Security and Medicare. Consult an advisor about the optimal age to start collecting Social Security and your options for Medigap insurance coverage to complement Medicare.
- Consider semiretirement and travel. Even if you want to travel extensively in retirement, think about working part time. With today’s technology, you may be able to do both.
- Plan for retirement withdrawals. Work with an advisor to make sure your savings can support the lifestyle you envision. If you are fortunate enough to have surplus wealth in retirement, consider making gifts to family members or charities so you can enjoy seeing the positive impact of your wealth.
We suggest setting a specific goal in one of these areas of financial planning. Give yourself a deadline to get it done. Financial planning is complex, nuanced, and best accomplished as a series of small tasks completed with the help of qualified professionals.
The original version of this article was written by Heritage for the January/February 2024 edition of The Light, a local magazine serving Broward County, Florida.