Welcome to 2015! I hope you had a wonderful holiday season and rang in the New Year with style. Colleen and I celebrated with friends, sipped champagne, had a wonderful dinner – and we still managed to get tucked into bed by 10:00pm. Such is life with two young children. Parties or not, they still wake up at 6:00am…
In the spirit of the season I thought I would put forward several candidates for financial resolutions this year. With no further ado, here’s my top five…
Max out your 401K
I preach constantly about the importance of the 401k. We also hear endlessly about putting away at least enough to get your company match, but make this year the one you max it all out. The 401k deferral limit has been raised to $18,000 for 2015 ($24,000 if you are over 50). Use it. If you want more motivation you can find it here.
Start that 529 Plan
If you have kids, get moving and open the 529 plan for college saving. I find lots of misinformation floating around about the 529 plan. I think it is one of the great savings vehicles for parents, but woefully underutilized. I consider it inefficient and wasteful to pay more in taxes than we need to. The 529 plan allows you to shield investment earnings from taxes when they are used for educational purposes. This is incredibly beneficial for relatively affluent people living in high tax states such as California and New York. Plus you can super size it!
Prepare for Volatility
Oil price crashing. Putin flexing his muscles. Hard landing in China. Recession in Europe. The Fed: raising or not raising? The US stock market has scaled an ever increasing “wall of worry”. Despite all the challenges, the stock market has gone up since bottoming in 2009. The last real pull back we had was way back in 2011. I’ve written about the decrease in US stock volatility before. I don’t know when this period of relative calm will end. But it will. And we should not be surprised when it does. When your favorite wine goes on a 50% off sale, you go buy a case. Think about stocks the same way.
Kill Your Debt
Many people with relatively good financial habits still carry credit card debt. Some people are under the mistaken impression that this helps your credit score. It doesn’t. If you have high interest debt, make this the year that you retire it. Investment returns are highly variable and not guaranteed. The savings on your debt interest, on the other hand, are guaranteed if you pay them off. Plus, you don’t really want to spend years paying for the pizza you bought in December, do you?
Establish a Healthy Lifestyle
"If exercise could be packaged into a pill, it would be the single most widely prescribed and beneficial medicine in the nation." Robert N. Butler, MD, Former Director, National Institute on Aging.
According to Fidelity Benefits Consulting the average 65 year old can expect to pay $220,000 in retirement health care costs. This can dent even the most diligent saver’s retirement kitty. So anything we can do to keep ourselves fit into retirement will have a major benefit on our lives and pocketbooks.
Personally, I have had a very difficult time maintaining a healthy lifestyle with two kids, my own company and all the obligations that come along with a young growing family. I’d like to make this the year that my thrice-weekly exercise makes it back into the top ten on the priority list.
I hope you and your families have a wonderful 2015! I look forward to communicating with you more over the year. What ever your goals for the year, I wish you happiness and success as you pursue them.
Brian McCann CFP®
Note: The contents of this site are general in nature and not intended as specific investment advice. All investments are subject to risk; including loss of investment value. If you have any question regarding investments or concepts in these pages, please consult with an investment professional.