12 Crucial Money Steps to Take Now for a Better Year Ahead

financial checklist

The beginning of a new year is an ideal time to reset your finances and work towards a more profitable and productive year.

Here is a financial checklist with 12 money steps that will help provide a solid start to a new year.

Review your financial goals

If you have pre-determined financial goals (such as buying a home in two years or becoming debt-free in five years), review them to see if any adjustments are required. Otherwise set new goals.

Prepare a monthly budget

Take a look at your current financial status and income and make a monthly budget. Be meticulous about including all your monthly expenses, payments and incomes and balance them carefully to have control over your finances.

Rationalize your debts

If a significant portion of your earnings have been going to pay down debts, it is time to consolidate and refinance your debts. Make a goal to get rid of your costliest debts first, even if it requires cutting back on your spending.

Automate savings

If you haven’t done it already, you could start your new year by creating an automated savings plan. The simplest way to achieve financial discipline is to set up a direct deposit from your monthly paycheck into a dedicated savings account.

Rebalance your portfolio

Evaluate your current asset allocation in the backdrop of the prevailing market conditions and the economy. Make sure your portfolio is aligned with your short- and long-term investment goals and delivers a safe return on investment.

Assess insurance coverage

A new year is the right time to review all your insurance policies. Do you think your life, health, home, auto, and other risks are sufficiently covered? Are you optimizing your premiums and getting the best discounts? Take a hard look.

Get your credit report

You can obtain your free credit report annually from Experian, Equifax, or TransUnion. Just visit the official website AnnualCreditReport.com and review it thoroughly. If you find any discrepancies, make sure to get them fixed.

Improve your credit score

Your credit score will impact your ability to get a loan. It may even affect your chances to rent a house or qualify for a job. If your credit score is on the lower side, make it a new year resolution to improve it and boost your financial credibility. Usually this means paying down existing debt or, if you have none, open a new credit line but keep it unused.

Consider freezing your credit

It costs nothing and will protect you from identity theft and IRS scams, which are rampant now. Basically, nobody but you can take out new debt in your name. If you need to get a loan, you can unfreeze your credit for a day or so and it will “refreeze” automatically. Contact the credit bureaus for instructions.

Increase retirement contributions

Depending on your age and income you should check whether you are contributing the maximum affordable amount to your retirement plan? Even a small increment of $10 to $15 additional dollars a month will have a compounding effect over time. Doing the minimum to get a match? Double that. At 10% of income. Stretch to 12% or even 15% if you can.

Do a risk tolerance checkup

Run your existing investments through a risk tolerance test. Ask yourself: What are the inherent market risks in my investment? Can I sustain in the worst-case scenario of an investment loss? Do I have expenses, such as children’s college tuition, coming up?

Write a will

A new year is a time to be happy and optimistic. But financial prudence demands that you should have a will in place to ensure that your assets are distributed after you to your beneficiaries according to your wishes. Work with a financial advisor or attorney to get started.

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