Looks like we’re finishing up 2017 with stocks roaring to record highs… why fix what’s not broken? As stocks rise (or fall), our portfolios have an increased likelihood of getting out of whack. Thus, tip #1 as we head into the new year is to review your asset allocation. As an example, you may have started the year with an 80% stock/20% bonds portfolio and as stocks have risen you may now be even more aggressively imbalanced at 90% stocks.
- Look at what your money is invested in. Ensure your asset allocation matches your risk tolerance (AKA: re-balance). Additionally, check your investment diversification.
Wouldn’t it be nice to get a pay raise? Your retirement accounts agree!
- Bump up your savings: 1% is okay, 2% is great, 3%+ is super awesome crushing it. The point of the story is that there is a ton of opportunity for your dollars to grow if you save a little more each year. Some assumptions:
- $50k salary with 3% annual raises
- Each investor starts with 3% annual contribution and then raises by 1, 2, and 3% for 5 years
- Contributions continue at this 5 year cap-rate for 30 years and then stop (notice the slope change)
- Money is invested for 40 years total; 6% annual return
Peace of mind is our target here. Let’s jump-start the year by focusing on what’s important to you. Here are a few more financial items to consider:
- Check the rear-view mirror: Which accomplishments are you proud of? Which mistakes can you learn from? What do you wish to avoid moving forward?
- Define goals for 2018… think about your values and life mission
- Check IRA eligibility for 2017… April 16th, 2018 is the deadline for making ’17 contributions
- Check work benefits such as Health Savings Accounts (HSAs) which are triple tax advantaged
- Double check your bills. Any unused monthly memberships? High interest rate debts that need a stronger repayment plan?
…More well-rounded life tips:
- Read! Learn something new that will make you better and encourage you to think
- Over-plan your next trip…get “weird” and save for your trip before your trip
- Know thy self… look within and find out more about what makes YOU happy. Write these things down, they’re freakin’ important!!