New year, new you: Improve your financial life
It's time to balance your income and outgo, start saving smarter, and find investments that offer bang for your bucks
While many New Year's resolutions revolve around getting physically fit, focusing on finances is sure to reap tangible rewards.
Of course, there's no plan or piece of advice that will fit every individual or family, but these basic steps can be a launch point for financial success.
Make a financial plan
Jim Wigen, a portfolio manager and financial adviser who teaches personal-finance classes through continuing-education programs at TCU and UTA, says either on your own or with the help of a financial adviser, determine how you want to balance spending with paying off debt, saving and investing. Determine what you want your retirement to look like, and calculate how much money you'll need to live that way. Having goals will help keep your spending on track. You can also set realistic expectations for how you want to live now and in the future.
"One big message that I have is so many people get caught up into saving money and being debt-free at the cost of living their life," Wigen says.
Nick Michels, a financial adviser at Edward Jones in Fort Worth, agrees. Having a financial plan that is tailored for your family will help you find the balance. "When it comes to investing, there's going to be ups and downs," Michels says. "It's the people who stick to a financial plan or strategy who work out well in the end."
Start saving for retirement
With so many things to save for -- cars, homes, children's education -- it's easy to justify postponing retirement saving.
Larry Lockwood, a professor of finance at TCU's School of Business, says it's important, no matter your age, to be putting money away for retirement. He advises that you not only enroll in your company's 401K or pension program, but also that you set aside a separate portion of your salary, ideally 5 to 10 percent, for personal investments. Wigen agrees. "Even before parents plan for their kids, plan for yourself," he says.
Diversify your investments
The amount of risk you take in investments is highly personal, as age, salary and savings should factor into your decisions. In general, Lockwood suggests varying investments across "stocks, bonds, commodities, real estate and international investments, including investments in emerging markets." It all may sound overwhelming, but a good financial adviser can guide you to a solid plan. Lockwood suggests searching for a diverse mutual fund. "Mutual funds offer cheap and efficient diversification, and their shares are easy to buy and sell," he says.
And don't try to time the stock market. So-called "playing" the market is a game that's tough to win. Lockwood suggests thinking more long-term, especially as the market in 2013 reacts to fallout from international and local economic strain.
"It's simply too difficult to know when to jump in and out of the market," he says. "Often the market spikes quickly, and the investor will miss out on the gains potential."
Pay down credit card debt
Paying off debt is a given in any financial plan -- it's important to have a game plan for your mortgage, student loans and car notes. But because of the high interest rates, Lockwood says it's crucial to make a sound plan to pay off any credit card debt your family has accumulated. "Resolve in 2013 to do everything you can to pay that down," he says. "You're paying extraordinary interest rates on that money."
Set a budget
Going beyond having a financial plan with long-term goals, figure out how to spend and save your money on a daily basis, Michels says. "A lot of people don't realize how much frivolous spending they're doing each year until they see it on paper," he says.
With online banking, it's easy. Michels recommends sitting down once -- or several times -- a month and looking at your statements. A seemingly simple philosophy to live by is to live below your means, Michels says. "I can't stress the word discipline enough," he says.
Consider how you can put aside small amounts of money daily, even if it's just by making coffee at home instead of buying a cup on the way to work. Wigen suggests keeping a change jar that you fill with more than coins. "It's amazing how quickly you are able to save when you are saving change and $1 bills," he says.
Similarly, enroll in any saving programs that your bank allows, such as Bank of America's Keep the Change program, which rounds up debit card purchases to the nearest dollar and transfers the change to your savings account.
Get to know new policies
Lockwood suggests that investors with a high net worth talk to their accountants or financial advisers about how new tax policies locally and nationwide will affect them, "especially as they apply to taxes on capital gains, dividends and estate distributions."