AUTOMATE YOUR BILL PAYING. That way, you’ll avoid late payments—crucial to maintaining a good credit score. The downside: You need to be vigilant about keeping enough in your bank account, so you don’t trigger fees for overdrafts or insufficient funds. This is a particular concern with credit card bills, which can vary so much from one month to the next.
SET A FLOOR FOR FINANCIAL PAIN. Suppose you have $400,000 saved. What’s the minimum value below which you never want your portfolio to fall? Let’s say it’s $300,000, or $100,000 less. Divide that $100,000 by 0.35 and you get $286,000. That’s the maximum sum you should have in stocks. Why 0.35? In a bear market, the average loss is 35%.
CHECK YOUR BENEFICIARY DESIGNATIONS. Your retirement accounts and life insurance will typically pass to the beneficiaries specified on those accounts, not the people named in your will. If your family situation has changed, or you simply don’t remember who you listed, take a moment to review your beneficiary designations.
GET SPENDING MONEY OUT OF STOCKS. Calculate how much cash you’ll need from your portfolio over the next five years. That money should be out of stocks and invested in nothing more volatile than high-quality short-term bonds. You don’t want to be forced to sell stocks at depressed prices—and that could happen if your time horizon is less than five years.
SET UP TWO-FACTOR AUTHENTICATION. If a thief gets online access to your financial accounts, your life’s savings could be at risk. What to do? If your bank, brokerage firm or fund company offers it, set up two-factor authentication. The firm will text you a special access code every time you log on or when you log on from an unrecognized computer.
REGAIN YOUR BALANCE. Calculate your portfolio’s split between U.S. stocks, developed foreign markets, emerging markets, bonds and so on. Compare your current allocation to your target portfolio percentages. Buy and sell to bring your portfolio back into line with your target weights—but try to trade in a retirement account, so you avoid triggering taxes.
PUBLICLY COMMIT TO CHANGE. Ponder your behavior, decide how you’d like to improve—and then tell friends and family. On your own, you may not be disciplined enough to save more, lose weight and exercise regularly. But if you know that, by letting your New Year’s resolutions slide, you’ll look bad in the eyes of others, you’re more likely to persevere.
AIM TO BE DEBT-FREE BY RETIREMENT. If you aren’t, you’ll have an added living cost to cover. That could necessitate larger IRA withdrawals or selling winning stocks in your taxable account. This extra income could, in turn, trigger taxes on your Social Security benefit and larger Medicare premiums. To avoid those pitfalls, pay off all debt before you quit the workforce.
GIVE AWAY APPRECIATED ASSETS. By donating stocks with unrealized capital gains, you can help a charity, avoid capital gains taxes and get an immediate tax deduction. Looking for more retirement income? Use appreciated assets to buy a charitable gift annuity. Over age 70½? You could save on taxes by donating part of your IRA’s required minimum distribution.
INVESTIGATE A REVERSE MORTGAGE. Once retired, borrowing against your home’s value shouldn’t be a first choice, but a last resort. Still, it’s helpful—and comforting—to know what that last resort might be worth. To that end, try the calculator at ReverseMortgage.org. Pay attention not only to the money you’ll receive, but also to the hefty fees you will incur.
LOOK FOR INSURANCE GAPS. Many folks agonize over whether their policies are too large or small. A bigger danger: Not having coverage at all, because your life has changed but your insurance hasn’t kept up. Just had kids? It’s time for life insurance. Grown wealthy? Consider umbrella liability insurance. Started working for yourself? You may need disability coverage.
FIND A WELL-RUN CHARITY. There’s a host of sites that can help you identify top-notch charities, including CharityNavigator.org, CharityWatch.org, GiveWell.org, GuideStar.org and MyPhilanthropedia.org. The most efficient charities spend less than 10% of their donations on administration and fundraising, so more ends up with the folks they aim to help.
BE THANKFUL. Great vacations and wonderful family events fade from memory. Similarly, we quickly adapt to material improvements in our lives, such as the new car and the remodeled kitchen. To counteract this process of adaptation, pause for a moment, and ponder the major purchases you’ve made over the past year and the great experiences you’ve had.
HAVE A FAMILY TALK ABOUT COLLEGE. How much financial help can you give your children? If they’ll need to shoulder part of the cost, tell them long before they start eyeing colleges. What career do your teenagers plan to pursue? If they’ll likely end up with a modest income, you should counsel against colleges that will require hefty student loans.
REASSESS YOUR EMERGENCY FUND. Experts often recommend keeping three-to-six months of living expenses as an emergency fund. Just left a secure job to strike out on your own? You should probably hold more cash. Just retired? Now that losing your job is no longer a risk, you might shrink your emergency fund—and perhaps shutter it entirely.