The New Year offers a fresh start. It’s a time when many of us feel energized, optimistic and open to change. When you set your New Year's resolutions, consider financial goals too. Set goals that are attainable and measurable. Break each goal into steps, write those steps down, and set deadlines for accomplishing each one.
My colleagues in PNC Wealth Management offer the following suggestions:
- Prepare a personal net worth statement. This is simply a list of all your assets (home, 401(k) plan, IRAs, bank accounts, life insurance, et cetera) and your liabilities (mortgage, credit card debt, et cetera). Many people are surprised to discover how much this simple exercise can help them focus on financial goals.
- Create (or refresh) your budget. This is not as hard as it sounds. If you use your bank's online bill pay service, a good place to start is the summary information found right on the website. Your credit card company may also have provided a year-end summary of your spending. You can't set goals for spending and saving without understanding where your money is currently going. As you look at these tools, think about what you are spending your hard-earned money on – differentiate between wants and needs.
- Pay yourself first. Set a savings goal. You can start with 3 percent to 5 percent of your pay and work up to 10 percent, the generally recommended amount for most folks. Have it automatically deposited into a separate account. If your employer offers a 401(k) plan, that is the best place to start. Try to at least defer up to the corporate match. If your employer doesn't offer a 401(k), talk to your banker or wealth planner about setting up an IRA. Paying yourself first forces you to adjust your spending habits.
- Pay off credit card debt. This is likely the highest interest-accumulating debt you have. If you have only been paying the minimum, set a goal to pay a specific amount more each month. And through creating a budget and setting savings goals, you should be able to find ways to reduce spending on the "wants" and reduce your use of credit cards. Your ultimate goal should be to charge no more than what you can pay off each month.
- Review your estate planning documents, tax plan and insurance. Documents that everyone needs include a will, durable power of attorney, medical power of attorney, directive to physicians (living will), and a HIPPA release. Work with your financial adviser to identify opportunities for tax savings since laws change frequently. Life insurance policies should also be reviewed annually to see if they still meet your needs.
- Rebalance your investment portfolio. Throughout the past year, certain asset classes may have performed better than others. Meet with your financial adviser to rebalance your investment portfolio to align with your financial goals.
My last word of encouragement is to educate yourself. Pick a financial topic for you to learn more about this coming year. Ask your banker about workshops your bank is holding or what resources it has available. We can all improve our financial well-being year-round, but taking advantage of the new energy that comes with a new year is a great place to start.
Chris George is senior vice president at PNC Bank and longtime Wilmington resident. He has served PNC and its predecessors for more than 20 years in various leadership roles. PNC Bank, N.A., a member of The PNC Financial Services Group, Inc., is one of the United States’ largest diversified financial services organizations, providing retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management.
These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.