Happy New Year everyone! If you’re like me, you have undoubtedly made a few resolutions. Mine are to drop a few pounds and relax more when I’m off to name a few.

But today I thought we would talk about financial resolutions for the New Year. In order to do that, you first need to decide what your financial goals are for 2020. Is it to save more? Pay down debt? Whatever you’re hoping to accomplish, without a specific, measurable goal that can be monitored along the way, you will most likely end up making the same resolutions again for 2021 because you didn’t reach those goals in 2020. Here is part one of a two-part series to help guide your resolutions.

1. Create a budget — According to a 2013 Gallup poll, only about a third of all Americans keep a detailed monthly budget. This is by far the best way to get your financial house in order. No matter how many people come in thinking they keep a good budget, invariably there are expenses they forgot to account for. There are only two components to your finances, money in and money out. Saving is only part of the equation and unless you control what goes out, you’ll struggle to make progress.

2. Stop looking at your portfolio — Tired of your emotions getting the better of you? Make a resolution in 2020 not to check your portfolio constantly, or better yet, turn off the financial media. Seek advice from a financial professional rather than a TV show that may have little to do with your actual financial situation. Also, constantly monitoring a long-term portfolio does nothing to help further your investment plans except tempt you to make unwarranted changes.

3. Contribute to a Roth or Traditional IRA — Open up either a Traditional IRA or Roth IRA, both of which have $6,000 contribution limits in 2020 for those aged 49 and under, and $7,000 for persons aged 50 and older. A traditional IRA is a tax-deferred account, meaning you'll owe federal tax once you begin making withdrawals during retirement, but contributions may also lower your current-year tax liability. Conversely, gains in a Roth IRA are completely free of taxation when taking withdrawals during retirement, but there's no upfront tax deduction as with a traditional IRA. Which one is better? That depends on your situation, but given our historically very low tax environment, I tend to favor the Roth more. You should consult with your tax advisor to evaluate your options.

4. Maximize your 401(k) contribution — Pension plans in the private sector are almost nonexistent today. They have been replaced by defined contribution plans such 401(k)s and 403(b)s. Contribution limits are $19,500 for employees under the age of 50 and $26,000 for those aged 50 and over. If your employer matches your contributions, that’s even better. Every year, commit to automatically increasing your deferrals by an additional 1%. That way, you don’t really notice it coming out of your paycheck. Before you know it, you’ll be at a very high percentage and well on your way to saving for retirement.

5. Ramp up your emergency savings — According to a 2016 GOBankingRates survey, nearly 69% of Americans have less than $1,000 in savings, including 34% with $0, and only 15% of those surveyed had $10,000 or more saved for possible emergencies. You should have enough cash to cover at least three to six months of expenses should an emergency, like losing a job arise.

6. Adjust your tax withholding status — This one has two arguments. On the one hand, adjusting your withholding so that you do not get a refund is technically the “right answer.” That money could be going directly into a savings vehicle such as your 401(k). On the other hand, people tell me that they use their refund as a forced savings account and wouldn’t otherwise save that money. I can understand that point of view, but if you have a 401(k) or an IRA, consider that option instead.

7. Make your savings automatic — One of the easiest ways to derail your retirement, as well as your financial resolution to save and invest more, is simply "forgetting" to do so. If you have to remember to transfer funds from a checking account to a brokerage account every week, you're most likely going to forget.

8. Take a vacation — I feel like this should be at the top of everyone's list — make sure you take time for you. Taking a vacation often leads to greater productivity at work and has significant health benefits. Plus, as investors we all need to unplug on occasion and enjoy time with our friends and family.

Check out next week’s article for additional guidance for your financial resolutions. Happy New Year!

T. Eric Reich, CIMA, CFP, CLU, ChFC is president and founder of Reich Asset Management and can be reached at 609-486-5073 or eric@reichassetmanagement.com.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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