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

Federal Way business closes doors

QualChoice Health Plan Services will permanently close their doors Dec. 31.

Puerto Vallarta takes Taste of Federal Way title

Nine restaurants help raise $8,500 for local nonprofits.

FUSION hosts chamber after hours in Federal Way

Guests learn about FUSION’s mission and how the boutique benefits local families in need.

Planet Fitness celebrates remodeled Federal Way location

Federal Way Chamber highlights event with ribbon cutting.

Federal Way Chamber to present impact awards at annual gala

Chamber to recognize Abbe Vineyards Winery, The Historical Society of Federal Way, Highline College.

Pauline Nganga, a Kenya-born Federal Way resident and former registered nurse opened her healthcare staffing business in June of 2017, and recently opened a location in Oregon. Photo courtesy of Pauline Nganga
Federal Way nurse pursues passion for healthcare with staffing business

Diligent Healthcare Staffing places certified nurses with facilities around region.

State of Chamber: Strong network means economic relevancy for businesses

Since 2014, the Federal Way Chamber has been working to meet its… Continue reading

Housing crisis fuels opposition to Safeco Field investment

Coalition calls on King County Council to divert public money away from stadium maintenance and put it toward affordable housing

Classy Gorilla finds niche with singing telegrams

Federal Way High School grad once taught the chicken dance to Macklemore

Center Plaza owner rebuilds shopping center after massive fire

May 2017 blaze destroyed nine businesses in Federal Way’s downtown core

Healing chronic pain: Regenerative medicine clinic opens in Federal Way

Dr. David Velling has specialized in pain management for two decades

Cindy Ducich
Cindy Ducich named sales manager for Federal Way Mirror

Longtime multimedia sales representative Cindy Ducich has been promoted to sales manager… Continue reading