REVIEW THIS YEAR’S SPENDING. Which expenditures do you remember with a smile—and which prompt a shrug of the shoulders and maybe even a wince? To jog your memory, look back through your bank and credit card statements. Lavishing dollars on stuff you don’t enjoy? Maybe it’s time to change the way you spend.
SET UP A HOME EQUITY LINE OF CREDIT. Be sure to read the fine print. But typically, all that’s involved is paperwork and perhaps a $50-a-year fee. Ideally, you’d never use the credit line. But it could come in handy if you have a financial emergency and as a lower-interest, tax-deductible alternative to car loans and education loans.
THINK OF YOUR ASSETS AS INCOME. If you retired today, how much income would your nest egg generate? One rule of thumb says that, in the first year of retirement, you can withdraw 4% of your portfolio’s value, equal to $4,000 for every $100,000 saved. It’s a sobering way to assess your retirement readiness—and it might prompt you to save more, postpone retirement or work part-time in retirement.
CAP ALTERNATIVE INVESTMENTS. How much do you have in alternative investments—everything from gold to commodities to hedge funds? As a rule, keep your allocation to 10% or less of your total portfolio’s value, and favor simpler, less expensive options, such as funds that focus on gold stocks and on real estate investment trusts.
UPGRADE YOUR CREDIT CARDS. If you use one that doesn’t offer cash back or other rewards, swap it for one that does. Pay an annual fee? That might be worth it for the first year if it’s a travel rewards card that offers a large initial bonus. But if you can’t get a retention bonus or the fee waived for year two, you might cancel and get a new card.
IMAGINE STOCKS PLUNGED 30%. That’s not a prediction, but it is always a possibility. Think about your portfolio’s loss in dollar terms, so it seems more real. Ponder whether the financial hit would unnerve you—and whether it would imperil any upcoming goals. If the answer is “yes,” you might want to lighten up on stocks.
ROUND UP THE MORTGAGE CHECK. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase your monthly savings, the extra $88 a month could allow you to pay off your mortgage years earlier, and you’ll earn a pretax return equal to your mortgage’s interest rate. That rate will likely be lower than the long-run return on stocks, but it should be better than you can get with high-quality bonds and certificates of deposit.
DROP UNNECESSARY INSURANCE COVERAGE. If you no longer work or have more than enough saved for retirement, you can likely ditch your disability insurance. If the kids have left home or you have a sizable nest egg, you might drop your life insurance. If your car is old and doesn’t have much value, you might get rid of your auto policy’s comprehensive and collision coverage.
IMAGINE YOU WERE THE EXECUTOR for your own estate. What would make your job easier? You might consolidate financial accounts, shed illiquid assets like collectibles and investments in private businesses, draw up a letter of last instruction that details all assets and debts, and compile a comprehensive list of usernames and passwords.
REVISIT YOUR DEBTS. Think of borrowed money as a negative investment: Instead of making you money, it’s costing you. If you have high-cost debt, paying it off—or replacing it with lower-cost debt—should be a top priority. What about lower-cost debt? That might also be worth paying off, especially if the alternative is to buy bonds or CDs in a taxable account.
FUND YOUR IRA—FOR 2017. This time of year, folks are exhorted to get their IRAs funded for 2016 before the April 17 tax-filing deadline. That’s a good idea. But if you want to get the most out of your IRA, you should also make your 2017 contribution. That way, your money will be invested for longer—and there’s the potential for even more tax-advantaged growth.
PROVE YOUR LOVE. This week, we celebrate Valentine’s Day. Want to show your love for your family? Make sure you have enough life and disability insurance. Check you have a robust estate plan. And talk to your family about how much financial help you can provide while you’re alive—and what they can expect upon your death.
GET READY TO REMODEL. This is the time of year when homeowners start lining up contractors for their spring remodeling projects. If you’ll need to borrow, consider setting up a home-equity line of credit. Planning to sell in the next few years? Stick with cosmetic improvements and avoid major projects, because you’re unlikely to recoup the cost.
VENTURE ABROAD. Foreign shares account for 46% of global stock market capitalization and are far cheaper than U.S. shares, yet many investors are shying away from international markets after six years of mostly lackluster performance. HumbleDollar’s advice: Make foreign shares a permanent 33% to 40% of your stock portfolio.
CHECK YOUR CREDIT REPORTS. Every 12 months, you can get a free look at your credit reports from each of the three major credit bureaus by heading to AnnualCreditReport.com. Check not only for mistakes, but also for accounts you don’t recognize. That could be a sign of identity theft. While you’re at it, you might find out your credit score.