Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
9 tips for your New Year's money resolutions
Reach your 2024 money
goals with these easy steps.
Fidelity Viewpoints
Key takeaways
· Financial
resolutions may be among the best New Year's resolutions for 2024—as many
people are still feeling the sting of high prices and rising housing costs.
· Fidelity's
annual New Year's Resolutions Survey has found that paying down debt, saving
more, and spending less are the top money goals for those setting them.
· Our
holistic approach to your entire financial picture can help you set yourself up
for success no matter what your goal.
A new year can bring a new sense of
optimism—particularly when the page is turning on a year like 2023. Though 35%
of Americans say they're in a worse financial situation compared to this time
last year, 2 in 3 people believe they'll be better off in 2024, according to
Fidelity's 2024 New Year's Financial Resolutions Study.1
A positive attitude can go a long way. And
setting yourself up for a prosperous year ahead with some savvy planning can
help ensure your success.
What are the best New Year's resolution ideas for 2024?
From stubbornly high
prices to rising housing costs to steep interest rates, it's been a year of
relentless financial strain for many.
And yet, two-thirds of
Americans (66%) are choosing to focus on financial resolutions in the new year.
Saving more, paying down debt, and spending less topped the resolutions list in
Fidelity's survey.
If those are among your
goals, here are 9 ways to make progress in the new year. If you're overwhelmed
and don't know where to start or what to do, consider starting with number 1
and going on from there.
Working through even a
few of these ideas can help strengthen your financial foundation and make it
easier to pay down debt, spend less, and save more.
1. Inventory your finances: Review your income, expenses, debt
balances, and the interest rates you're paying
The first step to achieving
any kind of financial goal is getting organized and finding out where you stand
now and where you want to be. So set aside 30 minutes to an hour to take
inventory of your financial life. This can help you prioritize your goals and
understand how much money you may be able to put toward them.
Here's what to look for:
·
What is your monthly take-home pay?
·
How much do you pay for essential expenses, like food, health
insurance and housing?
·
How much do you typically spend on nonessential expenses, like
entertainment and shopping?
·
And if you have debt, what are your balances, interest rates, and
minimum payments? Payments on debt should be considered part of your essential
expenses.
Being able to see all of
these facts and figures in one place will allow you to map out your approach,
whether the goal is to reduce your expenses or pay off debt—both of which have
the benefit of freeing up more of your income to save and invest.
Track your financial
information in one place, for free: Full View
2. Review your budget to make room for future priorities
A budget isn't etched in
stone. It's meant to be fluid and change as your lifestyle and needs evolve.
Setting some guardrails can help you stay in control and aware of where your
money is going. Take saving for retirement, for example: Without a budget or a
plan, long-term savings may not get as much attention as they could.
Your budget may look
different from the last few years if you're a student loan borrower, since
payments resumed in the fall. Or perhaps your rent payment is set to increase
at the beginning of the year. Stubbornly high costs and rising expenses that
are out of your control can throw your finances out of whack but planning
ahead—if you aren't already doing it—can help you stay on track and making
progress.
On Fidelity.com you can
easily create a budget to categorize expenses and help reach your savings
goals: Help me budgetLog In Required
If you need help keeping
day-to-day spending and saving on track, check out a money-management app
like Fidelity
Bloom®.
3. Protect your wallet from the unexpected by maintaining at least
minimum insurance coverage
It is not easy to build
up your financial foundation, so it makes sense to protect what you've worked
hard for. One of the best ways to do this: maintain at least minimum insurance
coverage.
Many employers provide
health, life, and disability insurance coverage for employees. The cost is
generally lower than buying coverage for yourself so taking advantage of the
benefits offered by your employer can be an easy way to cover all your bases.
Insurance is like the
umbrella you don't think you'll need. It may turn out to be the only thing that
protects you from the storm. Having insurance for unlikely but potentially expensive
events can help make sure your daily life can continue smoothly while
continuing to move forward toward your goals.
Estimate how much life
insurance coverage you may need to replace your income and find out how much it
may cost: Term life insurance quote
4. Save for future health care expenses with an HSA or FSA
A health savings account,
or HSA, is available to you if you're enrolled in a high-deductible health
plan. If you have health insurance through an employer, it may offer an HSA.
Plus some employers may offer to make contributions to your HSA (which count
toward the annual HSA limit.) If you have a health plan from the Affordable
Care Act Health Insurance Marketplace or state exchanges, consider opening a
Fidelity HSA.
You can think of an HSA
like a hybrid savings account. The money you contribute is earmarked for
medical expenses and has no expiration date. Once you reach a certain balance,
you can invest some of the funds for more growth potential.
The best part is that
HSAs offer a triple tax benefit: you don't pay taxes on money you contribute,
any part of the balance that's invested has tax-free growth potential, and
money you take out is tax-free when you spend it on qualified medical expenses.2
Read Viewpoints on
Fidelity.com: 3 healthy habits for health
savings accounts or consider opening a
Fidelity HSA
If you don't have an
HSA-eligible health plan but do have access to a flexible spending account
(FSA) through your employer, it can be worth considering. Like an HSA, the FSA
lets you set aside money before it's been taxed to pay for health care costs.
Any withdrawals are also tax-free, provided you use them to cover qualified medical
expenses.2
An FSA can help increase
the money you have available to pay for medical bills. But it's important to
know that funds saved in an FSA generally must be used in the same year as the
contribution. This means that when the new benefit year begins, you may forfeit
whatever funds remain in the account from the prior year. Some employers may
allow you to carry forward a small amount of your unused balance or can offer a
grace period (normally up to 2.5 months). Check with yours to see if you can carry
over a portion of your FSA at year end.
Read Smart MoneySM on Fidelity.com:HSA vs. FSA: Which is right for you?
5. Set aside cash to cover emergencies like car repairs, medical bills,
or job loss
After a trying and
unpredictable few years, nearly 8 in 10 Americans plan to boost their emergency
savings in 2024.
Maintaining an emergency
fund can help you avoid going into debt to pay for an unexpected one-time
expense, like a car repair or medical bill, or a long-term misfortune like
losing your job. Having cash on hand and accessible in a savings account or
money-market fund means an unforeseen event is less threatening to your financial
well-being and your goals.
A fully funded emergency
fund may sound like it could take a long time so setting a smaller goal could
make it easier to achieve. It can be a good idea to start strong with a target
of $1,000 or 1 months' worth of expenses. Keep contributing to your emergency
fund until you feel well prepared.
Consider investing your
cash in a money market fund or CD, which currently offer higher rates than most
savings accounts: Help your cash work harder
6. Try to get the full 401(k) match from your employer (if you have
one)—it's like free money
As you're getting
everything in order for the near term, long-term goals might get put on the
back burner. Since retirement is such a big goal and time is so important to
reaching it, saving what you can spare now makes good sense—particularly if
your employer offers a 401(k) match. The match is like free money so try to
save at least enough to capture the entire amount.
Let's say your employer
matches 100% of your contributions, up to $3,000 a year. That means you need to
contribute $3,000 to boost your 401(k) by $6,000.
As with any investment
account, be sure to review your asset allocation—that is, how your money is
divided among stocks, bonds, and cash. Make sure it aligns with your appetite
for risk and your financial goals, and is appropriately diversified.
Read Viewpoints on
Fidelity.com: 6 ways busy people can help build
their wealth and 3 keys to choosing investments
7. Keep more of your money for yourself by paying down high-interest
credit card debt
High-interest credit card
debt can be a drain on your finances. Rather than saving and investing for your
future goals, money goes to pay off past purchases.
Get a clear sense of your
debt and tips for paying it off: Debt dashboardLog In Required
Paying more than your
monthly minimum payments can speed up your debt repayment and reduce your
interest charges. If you have multiple balances to pay down, consider
concentrating all your efforts on the card charging the highest interest rate
for the most efficient paydown strategy (but continue making minimum payments
on all cards) to eliminate that balance as soon as possible.
Another strategy, called
the snowball method, suggests starting with the smallest balance first and then
rolling those payments into the next smallest balance once the first is out of
the way.
Read Viewpoints on
Fidelity.com: The debt
snowball method vs. the debt avalanche method
The sooner you stamp out
high-interest debt, the sooner you can reroute the income toward the future.
For Fidelity's take on navigating saving while paying off debt, read Viewpoints on
Fidelity.com: How to balance debt, saving, and
investing
8. Prepare for serious emergencies with a fully funded emergency fund
Once you have a strong
foundation, try to build a more robust emergency fund that could provide a
strong defense against an ongoing emergency like a job loss. Fidelity suggests
setting aside 3 to 6 months' worth of essential expenses for your emergency
fund. For example, if you spend $5,000 a month on rent, food, and insurance
premiums, you should aim to have $15,000 in a safe, no-risk account.
Exactly how much you need
depends on your personal financial situation. One thing to consider: The fewer
earners there are in your household, the more money you could consider saving.
Read Viewpoints on
Fidelity.com: How much to save for emergencies
9. Pay down debt with an interest rate above 6%
At this point, you may
have already paid off any high-interest credit card debt. But you may have
other debts with relatively lower interest rates, like a car loan for instance.
Fidelity suggests that if
the interest rate on your debt is 6% or greater, you should generally pay down
debt before investing additional dollars toward retirement. Read Viewpoints: Should you pay down debt or invest?
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
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