Three New Year’s Financial Resolutions You Should Make

I know it’s a bit early for new year’s resolutions.  But with 2019 just about a fortnight away, I thought I’d share some ideas for financial resolutions you might want to consider.  

Get a will: One recent survey found that 60% of Americans don’t have a will.  This is insanity if you care about those you love (and I’m going to go out on a limb and say that if you love somebody you care about them).  The minute you have assets and a family, particularly a family with minor children, you should have a will.   A will lays out who will take care of your children if you and your spouse die while they are still minors.  A will also defines who will watch over your assets until your heirs are able to manage their inheritances themselves.  If you die without a will in the United States, then the laws of the state where you reside will determine how your assets are divided.  Why would you let the government decide who gets what when you can do it from the grave? Drafting a will is relatively inexpensive, especially with many online options now available.  Oh, and if you have a will, pull it out and review it.  Things change and as they do, so should your will.

Rebalance portfolios: A balanced portfolio is an investment portfolio that has an appropriate portion in various asset classes based on your age, investment goals, and risk tolerance. Even if you had a perfect allocation of your assets at one point in your life, things will happen to necessitate a “rebalancing.”  Why? Because some of the assets in your portfolio will grow (or shrink) faster than others. So, in a very simple portfolio where half of your assets were in stocks and half in bonds, if stocks outperform bonds over the year, then you will end up with more than 50% of your assets in stocks at the end of the period. Assuming you want to keep that 50/50 split, then you’d need to sell some stock to invest in more bonds.  There are numerous, free apps that will aggregate all of your assets into one view so that you can see how balanced you are.  Some will even make recommendations regarding what the right balance for you is based on metrics about your life and goals. Just as a will might need to change as your life changes, so your portfolio should change with time. Look at it at least annually to be sure it’s changing in the right way.  

Review insurance policies: Less than 60% of Americans have life insurance policies.  This is a mystery wrapped in a travesty.  To be sure, not all individuals need such policies. If you are young and single, you can probably get by without one.  But most of us aren’t young and single.  If you are married, could your spouse stay in the house you are in if you died and your income went away?  That alone is a great reason to have a life insurance policy. The payout upon your death could help your better half pay off the mortgage.  Term life insurance policies are cheap and easy to get so there is little excuse for not getting one.  There’s even less of an excuse when you consider most employers offer some basic life insurance at little or no cost. In addition to life insurance, any insurance you have related to property should be reviewed.  Did you insure your house when you bought it and then add an addition or remodel a kitchen?  If so, you probably want to up your coverage to be sure you could rebuild the home at the quality level you updated it to through the renovations.  

Getting a will, rebalancing your portfolio, and reviewing your insurance coverage are three relatively easy things to do that provide significant benefits to you and your loved ones. Don’t procrastinate!