Make some financial resolutions and stick to them

By Doug Legg, Money Matters

By Doug Legg, Money Matters

If you make a New Year’s resolution, and you don’t follow through on it, what are the consequences?

It all depends. If you vow to learn French, but you never get past “Oui, mademoiselle,” your life will probably go on pretty much as before (unless, of course, you’re now living in France). But if you make some financial resolutions, and you abandon them, you could fall short of your long-term goals — such as a comfortable retirement.

Consequently, you’ll want to set reasonable and attainable financial resolutions — and then discipline yourself to achieve them. What sort of resolutions might you make? Consider the following:

• Boost your 401(k) contributions this year, and every year. If your employer offers a 401(k) or similar retirement plan, such as a 403(b) or 457(b), take full advantage of it. Your earnings have the potential to grow on a tax-deferred basis and, because you typically make pre-tax contributions, the more you invest, the lower your annual taxable income. Furthermore, you may have a dozen or more investment options within your plan, so you can tailor your choices to reflect your individual risk tolerance, goals and time horizon. If your salary goes up every year, increase your 401(k) contributions at the same time. Since the money will automatically be deducted from your paycheck, you shouldn’t find it hard to keep this financial “resolution.”

• Contribute the maximum amount to your IRA. Your traditional or Roth IRA can be a key part of your retirement savings. A traditional IRA can potentially grow tax deferred, while a Roth IRA’s earnings have the potential to grow tax-free, provided you don’t take withdrawals until you reach age 59 and a half, and you’ve had your account at least five years. Unfortunately, many people don’t fully fund their IRAs each year because they’re intimidated by the contribution limits ($5,000 per year, or $6,000 if you’re over 50). But there’s no need to fund your IRA all at once; you can do it incrementally. Why not write out a check to your IRA each time you get paid, or, better yet, have the money automatically sent from your checking account? Again, it will be easier to keep this resolution if you don’t have to work at it.

• Build an emergency fund. This resolution may take a bit more effort, but it’s worth it. If you can put away six to 12 months’ worth of living expenses in a liquid account, and only use the money for emergencies — car repairs, unexpected doctors’ bills, etc. — you may be able to avoid dipping into your investments to pay for these costs. And the less you tap into your investments, the better.

• Cut your debts. Here’s another resolution that sounds simple, but can be difficult to achieve. Yet, every dollar that doesn’t have to go for a debt payment can be invested for your future. In 2008, look for ways to cut your costs, and strive to live within your means.

• See a professional. If you’ve never worked with a financial advisor, make 2008 the year to start. A qualified financial advisor can objectively evaluate your situation and suggest appropriate financial strategies for helping you achieve your long-term objectives.

If you can follow all these resolutions in 2008, you can help position yourself for financial success — for many New Years to come.

Doug Legg is a financial adviser in Federal Way who can be reached at (253) 838-3332 or doug.legg@edwardjones.com.

More in Business

Networking group provides support for local business women

Kimberly DeMile, owner of Federal Way Jazzercise, recently started a local chapter of BAM.

Piper’s Playground offers indoor play space for dogs

Federal Way’s first indoor dog park opened Jan. 18.

From watchdog to community service, Mirror has a history of excellence | Mirror’s 20th anniversary

The Mirror has received multiple awards over the past 20 years for its journalism and advertising.

To BRE or not to BRE

Greater Federal Way Chamber of Commerce CEO says business retention is a top priority.

Uptown Square Early Learning Center celebrates opening with ribbon cutting

Center offers part- and full-day preschool program for 100 students.

Internationally popular bakery, cafe chain opens doors in Federal Way

85°C Bakery and Cafe known for its bread, cakes and coffee.

Federal Way Sears to close in early April

Company announced closure of 64 Kmart and 39 Sears stores throughout the country in early 2018.

Chamber investment is a strategy for business growth and economic connection

As we head into 2018, the Greater Federal Way Chamber of Commerce… Continue reading

Ivory elephant, wine-tasting event benefits homeless children

A portion of the proceeds from Feb. 3 event will go to Birthday Dreams.

Chamber, SCORE partnering to support small businesses

The Greater Federal Way Chamber and South Sound/Tacoma SCORE are working in… Continue reading

Federal Way Farmers Market Holiday Gift Bazaar has items for everyone

Federal Way resident Tabatha Almasan, left, is among local vendors at this… Continue reading

‘Gym on wheels’ brings flexible fitness to customers

Local man’s company equips van to go just about anywhere