The start of each year is a great time to reset, recalibrate and reboot your efforts at building better habits. Many people focus on physical goals — eating healthier, getting more exercise, losing weight — but other areas of our lives also warrant attention. If you’re a first responder, the new year is the perfect opportunity to take a good look at your financial situation and see what changes can be made to improve it.
You might want to meet with a qualified financial planner to review the numbers and see if any changes need to be made. If your agency doesn’t offer financial planning services (such as through your Employee Assistance Program, or EAP), you can reach out to Capital Edge Financial for help.
Below are some tips on beginning-of-the-year financial wellness courtesy of our friends at Capital Edge Financial and New York Life Insurance Company.
Financial New Year’s Resolutions for First Responders
Did you make any resolutions concerning your personal finances last January? If so, how did you do? Did you attain your goals or miss the mark? While the days leading up to New Year’s Eve are often spent reflecting on the year gone by, the month of January should be spent reflecting on the New Year, reviewing your financial goals for the past year, and then looking for ways to improve in the coming year.
The good news about New Year’s resolutions is that you get a fresh crack at them each year. Here are some financial moves that you should commit to making in the year to come.
You may have access to a 401(k), 457 or 457 Roth plan at work. Your goal should be to contribute as much as you can reasonably afford, up to the allowable maximums for the year.
Update Your Savings Goals
The goal with your savings account is to keep three to six months’ worth of bills liquid in your savings account for any financial emergencies. To help you reach your goals, be sure to transfer amounts earmarked for savings from your checking account to a designated separate savings or investment account. Better yet, have a set amount from your paycheck auto-deposited into savings account at another financial institution. That will make it more cumbersome to spend the money that you have managed to set aside. Plus, out of sight, out of mind. Before you know it, you will be surprised how much you have accumulated.
When making financial New Year’s resolutions, the key is to set realistic targets and remind yourself why you made the resolution when you’re tempted to give it up.
Make a Plan to Pay Down Debts
Now that Christmas has passed, many of us are afraid to look at our credit card statements. Take a few minutes now to set financial freedom goals for the New Year, including which debts to pay off first. If you have high-interest credit card balances, consider whether it would be more beneficial to pay off those high-interest debts or add to your savings. Another option to consider is transferring your credit card balance to a new card with a lower interest rate or even a 0% promotional rate. Imagine what you could do with all that extra money each month when you aren’t having to give it to the credit card companies.
Rebalance Your Portfolio
The stock market always has its ups and downs. Some sectors overperform, and some sectors underperform. Chances are that the sectors that did the best last year may not enjoy a repeat performance this year—and, of course, 2022 was pretty grim for most of them. By rebalancing your portfolio to its original or updated asset allocation, you take steps to lock in gains from the sectors with the best returns and purchase shares in the sectors that have lagged behind last year’s leaders. Your investment plans are not “set it and forget it.”
Review Life Insurance and Beneficiary Designations
As you move through your career, your life insurance needs continue to change. The amount of insurance you carry should cover things such as: funeral expenses, paying off debt, potentially paying off the mortgage, children’s future education, child care, funding emergency savings and lastly income replacement. The general rule of thumb is you should carry 12 times your annual income including overtime. Also, this is a great time to review your beneficiaries. You’ll want to check your pension, deferred comp plans, life insurance plans and the beneficiary through your employer.
How Do You Maintain Financial Resolutions?
The key is to set realistic targets and remind yourself why you made the resolution when you’re tempted to give it up. Transferring money from your checking account to a designated separate savings or investment account that’s not easily accessible—or having part of your paycheck automatically deposited in a savings account—can also help to remove any temptation.
How Much Money Can I Put Aside Each Month?
That depends on your individual circumstances. Once you work out how much you have coming in and review your spending habits and debts, it should become clearer how much you can reasonably set aside.
Some expenses, such as a mortgage and utilities, don’t allow for much wiggle room, but there are likely to be ways to cut down on others and allocate that money elsewhere. Generally speaking, it’s wise to save at least 15% of your income each month.
The Bottom Line
Take this opportunity to restate your financial resolutions simply and clearly for the New Year. Be cautious about setting too many or unrealistic financial goals. Otherwise, you may be unable to accomplish any of them.
It may be a good idea to maintain a checklist and a budget to keep track of how you are doing throughout the year so that you can make any necessary modifications. If you have a financial advisor, consider meeting with them to review the goals that you have set for yourself.
If you’re a first responder and need financial planning, retirement planning, life insurance, or other financial services, Capital Edge Financial is here to help. Visit capitaledgefinancial.net or send an email to firstname.lastname@example.org to schedule an introductory call.