Financial Resolutions: Advisers Say Make a Plan and Stick to It
TRAVERSE CITY -- A new year brings possibilities and opportunities for change.
About 45 percent of Americans made resolutions in 2015, according to a study from the University of Scranton and the Journal of Clinical Psychology.
So what better time for personal finance resolutions for 2017 and beyond?
"It's a good time to re-evaluate," said Autumn Soltysiak, a certified financial planner at Hemming& in Traverse City. "Everyone has resolutions and it's another good time to look at it."
Soltysiak added it's also important to keep it simple.
"The key is not to over-complicate things, but to take action," she said.
Larry Flynn, a financial adviser at Centennial Wealth Management, said the simplest financial resolution still applies.
" 'Save more' is always a good one," Flynn said. "Be more careful with spending."
Soltysiak said the first step is to have a plan in place.
"It always starts with a budget, whether you are just starting out or nearing retirement," Soltysiak said. "You have to spend less than you make."
Having a visible spending plan is also helpful, whether an Excel spreadsheet, an online budget or a simple print-out.
"Putting it on paper leads to a lot more success," Soltysiak said.
Once you have a personal budget, take a look at the money you owe, particularly credit card debt.
"Get your revolving debt paid down through lower interest rates," said Mary Beth Vandenberg, branch manager of the Traverse City branch at Lake Michigan Credit Union.
She said the time to refinance is now.
The Federal Reserve earlier this month announced it would raise interest rates by a quarter of a percentage point. The expected hike is only the second time since 2006 the U.S. Central Bank has raised interest rates since 2006.
"Before that happens, take advantage of the low interest rates, maybe refinance and get a lower interest rate to help pay the debt down," Vandenberg said.
Soltysiak said prioritizing debt also is a key. Take the debt with the highest interest rate -- usually on a credit card -- and emphasize that account first.
Vandenberg stressed paying above the suggested amount on the bill.
"If you pay just the minimum amount, you're not going to make any headway," she said.
Vandenberg also advises those with a loan re-examine it. She said this would be key for younger home buyers who didn't have much credit, but have been paying on a loan for a year or more.
"You can talk to your community lender who you have a loan through and see if you can negotiate a better rate," Vandenberg said.
Soltysiak offered two other financial resolutions for 2017.
The first is to start an emergency fund. Soltysiak recommended starting with $1,000, building up to have access to between 3 and 6 months of living expenses.
A second goal is to participate in a retirement plan at work, especially if there is a match in funds from the employer.
"Don't let free money go away," Soltysiak said.
Flynn said there is a "retirement crisis" in the United States, particularly since employers started phasing out pensions in favor of individual plans. Flynn said 61 percent of Baby Boomers have less than $50,000 put away for retirement.
"The wise thing is to be planning way ahead of time," he said. "I would set a goal as to where they want to be when they retire and put a plan together to get them from here to there now."
Flynn cautioned about an ostrich approach to retirement planning.
"Don't put your head in the sand and say, 'When I get older, it will be there' because it's not," Flynn said.
A good rule, Flynn said, is to take the desired amount of yearly income in retirement -- minus Social Security -- and multiply it by 20.
For example, if you want to live on $70,000 annually in retirement, Flynn figured $20,000 would come from Social Security. That leaves $50,000, meaning the person would need to save $1 million for the golden years.
"A lot of people need to wake up and recognize that," Flynn said.
Soltysiak said the New Year is also a good time to have an estate plan in place, including a power of attorney and a health care directive.
The New Year is also a good time to make a resolution to spend a little less than in 2016.
"These little things can add up and help to repay debt or to put it away into savings," Soltysiak said.