Top 5 Personal Finance Resolutions

monopolymoney It’s that time of year again — “resolution season,” and other than losing weight or exercising more, few areas of our lives are subjected to New Year’s resolutions more than personal finance.

So, if you’re going to make New Year’s personal finance resolution, here are 5 to choose from:

1. Get an insurance checkup.

The potential for major financial consequences of a catastrophic health issue, damage to your home or car, loss of life, or loss of your ability to generate an income means that insurance simply must be a priority in our modern life as a way to hedge against risk of loss. Remember that most bankruptcies are caused by uninsured health problems.

Make it one of your 2010 resolutions to take a little time this year and make sure you’ve got your insurance bases covered by talking with your own agent or checking with NetQuote for auto, health, life, renters, or any other insurance. NetQuote will gather quotes from several different insurers for you, allowing you to control the process a lot more than normal.

2. Begin an investing program for retirement.

Even though more and more people are investing for their biggest financial challenge – a  financially secure retirement – many aren’t saving enough or aren’t saving at all. One survey found that about 60 percent of people age 45 or older have less than $100,000 in retirement savings. If you run the numbers for what retirement will cost and what you’re likely to get from Social Security, it’s nowhere near enough. If you have the means, contribute the maximum to your 401(k) or IRA. If you don’t, try using one or more of my 17 sneaky savings strategies to save cash for investing or seek out other ways to make extra money.

3. Begin tax planning in January of THIS year for next year.

Every December, it seems that every financial publisher posts an article on “trimming your tax bill.” While these are generally filled with great advice, you shouldn’t wait until December to start using tax strategies. Throughout the year, select appropriate investments for your taxable and tax-advantaged accounts. For example: In tax-advantaged retirement accounts such as Roth IRA’s, make investments that have the potential to generate a lot of taxable income. In taxable accounts, focus on long term capital gains and/or qualified dividend income. And if your situation is at all complicated, get customized advice from a tax professional – not a blog … even this one.

4. Create and live by a budget.

This is crucially important. A lot of people manage their money by the seat of their pants, but successful personal finance requires careful and deliberate planning. Create a budget and use it to make decisions about your own spending and saving. Write down your financial goals – calculate amounts and time horizons for your kid’s college and your own retirement – so you can make the best investment choices. Plan your financial future to help you devise strategies for getting there.

5. Remove emotions from your finances.

It’s difficult, I know, especially when we consider how securely money is tied to our emotions. Emotions really are your enemy. They can cause you to buy at a market peak and sell at a market low, which is exactly the opposite of what you should do. If you can’t make financial decisions objectively, consider working with an objective adviser who can help you avoid rash moves.

Your best bet may be to do what I’ve done – use How A Second Grader Beats Wall Street and invest regularly in index funds, matching the market rather than trying to beat it.

Photo by mtsofan

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