Close Close
ThinkAdvisor

Financial Planning > Charitable Giving

15 financial resolutions for the New Year

X
Your article was successfully shared with the contacts you provided.

What is it about the New Year that we feel compelled to write down resolutions? The allure of a new year provides us with a blank slate; a brand-new opportunity to right all the wrongs we’ve done in the past year or to not do them again.

And we’ve all been there: making that list of 10 or 20 resolutions of things that we vow to change during this new year, our new opportunity at redemption. What kind of resolutions have you made — and kept — in previous years? What are your resolutions for 2015?

On my list are the usual suspects: hit the gym more (make time), read more books (I don’t know how I’m going to make time for that) and watch the entire roster of Oscar nominated films (wait, do I really want to do that?). But most important of all resolutions is to get my finances in order. I have a few heavy-duty goals that I want to meet in the next three years, so that means that having my financial house in order is a must.

As a financial advisor, do you keep a list of financial resolutions? Do you give a list of these resolutions to your clients? Now is the perfect time to get this conversation started.

These tips from WalletHub of 15 goals for 2015 should help you get the conversation started with your clients or prospects. If you have any additional tips, you can add them in the comments section below.

counting coins

1. Getting reacquainted with their finances

It might sound obvious, but your clients have to start somewhere, right? Make sure that they check the status of their financial accounts and evaluate their monthly cash flow. They should be able to gauge where they need to improve or upgrade an account if there are added benefits and you can make recommendations.

Remember: your clients’ financial needs will change from year to year and there are always changes in the market that they might want to take advantage of.

2. Making a budget

Did you know that only 39 percent of adults have a budget? According to the National Foundation of Credit Counseling, credit card debt will increase from $60 billion to $70 billion in 2015. “Those statistics make the need to create and maintain a budget seem a bit more pressing, though, especially since we’ll be putting ourselves at risk of another recession if we keep overleveraging at this pace,” says the report from WalletHub.

Some simple tips to make a budget:

  • take stock of all your bills from the past few months
  • make a list of your recurring expenses in order of importance; housing, food and health care should be priorities
  • compare the cost of these expenses against your monthly take-home
  • eliminate any expenses that would outpace your spending power
  • after that, compare your monthly spending to your planned budget to make sure you are abiding by it

See also: 3 resolutions that will enrich your retirement

sailing

3. Use the Island Approach

This approach is based on the theory of compartmentalization, which encourages the isolation of different financial needs, with the bottom line being to decrease debt.

4. Automate as much as possible

WalletHub makes a strong case for this one: “One of the most easily avoidable mistakes that people make in regards to their finances is missing due dates,” the report states. And being late on a payment can damage your client’s credit score. But make sure that they don’t fall into the “out of sight, out of mind” trap; keeping track of bills is very important to avoid fraud and overcharges.

See also:

Fidelity’s Feingold: 5 investing strategies for 2015

savings

5. Build an emergency fund

Another startling statistic: 56 percent of Americans don’t have a “rainy day” fund, according to the Financial Industry Regulatory Authority’s National Financial Capability Study. “Like someone without insurance, folks who lack an emergency fund are merely tempting fate and putting themselves at risk of financial catastrophe in the event of prolonged job loss or significant emergency expenses,” WalletHub cautions.

They recommend building a fund of about 12 to 18 months of take-home income, while making the exception that that won’t happen quickly. The key is to start now, and start building a six-month safety net before beginning to pay down debts, to ensure that your clients don’t end up where they started.

6. Getting out of debt

Taking steps like having a 0 percent balance transfer credit card, a credit card calculator, taking aim at the highest-interest balances first, while attributing only minimum payments to the rest, are other ways to strategically pay off what is owed at the lowest cost in both money and time, according to WalletHub.

See also: 

2015 outlook: Why financial wellness is the next big trend

increase

7. Improving the credit score

WalletHub recommends that the best way to improve a credit score is to maintain an open credit card account that is in good standing. “The card will then report positive information to the major credit bureaus each month, either building out your thin credit profile or helping to devalue mistakes from the past,” says their report.

8. Increasing all savings by 15 percent

According to the Federal Reserve, one in five people nearing the retirement age don’t have ample savings, while 55 percent say they will have to save more for retirement later in life to make up for not putting enough away now.

While retirement is very important, it is not the only thing that clients will need to save for: college, weddings, vacations and other expenses come to mind. For this reason, WalletHub recommends setting up a different account for each of these expenses and setting a yearly goal to increase the value of these accounts by 15 percent.

See also: 7 biggest retirement stories of 2014

charity

9. Giving back to charity

We have written extensively about how to give back to charity and who the biggest donors are in the U.S. But more than riding that feel-good sentiment you get after giving to charities or volunteering, WalletHub makes a case for donating cash rather than volunteering, and it’s not all about the tax liabilities involved.

“More specifically, the average American – who earns $28,829 annually and volunteers one hour per week – would be able to donate more than 7,200 meals to hungry children, provide roughly 2,200 measles vaccinations or give 160 refugees a year of clean water by just working an extra hour instead of volunteering and then donating the proceeds. Unless you’re the Iron Chef, you’re probably not going to cook 7,200 meals in 52 hours!”

10. Doing taxes early

While 28 percent of Americans wait to do their taxes in April, your clients don’t have to be one of them. WalletHub credits procrastination for 2.6 million people making math mistakes on their tax returns. To avoid any kind of costly mistakes, get your clients’ taxes started early.

See also:

3 last minute tax tips for 2014

Charitable planning in 2015: Weighing the pros and the cons

family savings

11. Setting a good financial example

Children are like sponges – what they hear and see, they will absorb and imitate. Remind your clients of this (if they have children, of course) and maybe that will open up their eyes a bit more. WalletHub also recommends giving kids a hands-on monetary experience, like with a game of Financial Football or Savings Spree, designed to teach kids the value of money and encourage saving. There are other financial vehicles, like an allowance, that will teach kids and teenagers to better manage their finances.

12. Taking commonsense steps to fight fraud

After the great Sony hack, Home Depot and Target’s security breaches, no one seems to be safe from having their online accounts compromised. WalletHub recommends taking steps to become a harder target for fraudsters, which can be used by your clients, your business and even yourself:

  • Shred sensitive financial documents before throwing them away
  • Put a lock on your mailbox, especially if you’re out of town
  • Make a credit card your primary spending vehicle and only sign for debit card purchases, instead of entering your PIN
  • Check your credit report every few months

See also:

Top 3 fraudulent schemes targeting insurers [infographic]

Top 9 investor threats for 2015: NASAA

assets

 

13. Minding the overall health

“Money, work, the economy and family responsibilities – all financial concerns in one way or another – are also the most commonly reported causes of stress, according to the American Psychological Association,” says WalletHub’s report.

Getting regular exercise, being healthy and getting the finances in order are all part of the efforts to keep health care costs low. “Feeling better will lead to wiser financial decisions that focus on the long term,” says Deborah Bauer, the Powell Distinguished Senior Instructor of Finance with the University of Oregon’s Lundquist College of Business.

14. Helping others

Sharing stories and experiences might help clients get the motivation they need to stay in the financial plan. Also, financial product reviews have the power to “drastically improve transparency in the personal finance space.” That is especially true now that the Securities and Exchange Commission is allowing financial advisors to interact with consumer reviews for the first time. The financial industry is ripe for disruption in this regard, as there are likely more reviews for dog walkers than for the professionals managing our retirement plans, according to WalletHub.

stress test

15. Stress testing

Preparing for the worst-case scenario, that is what financial planning is all about (and insurance, too). Putting the finances through the paces, like, for example, determining what would happen to your clients’ finances should the family’s breadwinner die or they lose their job, will help determine if there are enough savings, insurance policies or contingency plans in place to overcome potential hardship.

You can read WalletHub’s full article here.

See also:

Success in resolutions

5 business books to inspire you

Resolution for 2015: Drop more F-bombs