By Mary Ann Bourbeau
New Year’s resolutions should be about more than just losing a few pounds or putting down those cigarettes.
It’s a good time for people to take stock of their financial situation and make some necessary changes.
While too much money may have been spent over the holidays and it is too late to find any more income tax deductions for 2012, several financial experts have a few suggestions for improving financial health in 2013.
Thomas Sannelli, senior vice president of Rumson-Fair Haven Bank & Trust in Fair Haven, offered up a few tips. “It’s impossible to map out a route to your financial destination if you don’t know where you’re starting from,” he said. “Open every single financial statement – bank, credit card, student loan, mortgage, 401(k) and brokerage account – and take a look. Only when you have everything in front of you can you set priorities about what to do next.”
Sannelli said, if people are unable to keep their checkbook balanced or can’t figure out why checks have bounced, they should start fresh by opening a new account. “Leave enough in your existing account to cover any checks that haven’t yet been processed,” he said. “Then transfer the rest to the new account and close the old one.”
He also suggests signing up for online banking, which is free and is safe when used on a home computer.
“The advantage of online banking is that you can pay bills superfast and your account is automatically credited or debited for each deposit and payment, making it easier to stay on track,” he said.
Another suggestion for improving financial health would be to make 2013 the year to tackle credit card debt.
“What happens to the stock market and the housing market is completely beyond your control,” Sannelli said. “Credit card debt, however, is completely within your control. Eliminating or decreasing high-interest credit card debt is the start of improving one’s monthly cash flow.”
While Sannelli’s advice focuses on basic personal finance, Lauren Porter, a financial advisor for Edward Jones, offers suggestions for investing.
“Rebalance your portfolio to accommodate your risk tolerance,” Porter said. “If you spend too much time worrying about the ups and downs of your investments, your portfolio’s potential for volatility may be too great for your individual risk tolerance.”
On the other hand, Porter said, if you see little growth in your holdings, even when the financial markets are strong, you may be investing too conservatively. “It really comes down to a person’s comfort level for their risk tolerance,” she said.
“You should review your portfolio at least once in 2013 to see if it needs to be rebalanced. You also need someone you can talk to, someone you trust when you have questions.”
There has been so much talk lately about the debt ceiling and the fiscal cliff that investors may be afraid to take chances with their hard-earned money. “Don’t overreact to the headlines,” Porter said. “These issues are not insignificant but they shouldn’t keep you from investing.
“In any given year, you won’t have to look hard to find warnings and negative news events. Many people use these ominous-sounding headlines as a reason to head to the investment sidelines for a while. But if you don’t invest, you’re missing out on an opportunity to make progress toward your investment goals.”
Porter suggests that, instead of focusing on the news of the day, investors should make decisions based on their goals, risk tolerance and time horizon.
“There are always going to be negative things in the news, but you still have those goals to work toward,” she said.