If you’re under 50, this list of financial resolutions is the perfect way to start of your year. Having these financial details in place will give you a direction and peace of mind as you enter into the new decade.
(Click the featured times below to jump forward in the episode)
As you enter into a new year (and new decade!) you may want to look at how you can get your financial life in the right place. This may look different when you are younger than when you are older. This list of financial resolutions covers what people under 50 years old should get in place. Next week, we’ll talk about the financial resolutions for those over 50.
Start by calculating a net worth statement each year. Whether you did it in the past or not, do it now. List all of the assets you have as well as all of the debts. Keep track of this to see your progress and know your net worth. Ten years from now, you’ll have a ten-year record of your net worth and a better understanding of where you’re going. This is one of the ways to ensure you retire well off.
Get rid of all bad debt. There are certain types of debt that are fine to have, such as a mortgage on a home because it is likely to increase in value over time. But consumer debt is not something you want to have.
Increase your 401(k) contribution. The easiest way to save 10 percent of your income is through your 401(k) because that money never goes into your checking account. Increasing your contribution even 1 percent this year will make a big difference. How much are you contributing? Take this opportunity to put a little bit more into your financial nest egg.
Although it’s not fun to talk about, you want to prepared for the worst. Have an emergency fund, disability insurance, and life insurance. Most people under 50 should buy term life insurance. If you also have a spouse and kids at home, both of you need life insurance (even if only one of you is working). How much do you need? Check out an online calculator to get a ballpark idea.
Finally, you need an estate plan. Especially if you have kids, you need a will that explains who the guardians for your kids would be. You also want a financial and healthcare power of attorney for each of you. Then, have a document that outlines a lot of the financial details– such as life insurance company or where bills are paid–and anything else someone would need to know if you weren’t here anymore.
Listen to the full episode above or click on the timestamps below to hear more about a specific financial resolution.
[2:20] – Calculate a net worth statement every year.
[6:39] – Eliminate bad debt.
[10:50] – Increase your 401(k) contribution.
[13:04] – Protect against disaster.
[17:32] – Don’t ignore your estate plan.
PODCAST: The Foolproof Way To Retire Well Off
PODCAST: Debt & Retirement