10 Things to Keep in Mind for Financial Fitness in 2018

The tax code changes every year and affects everything from the taxes you pay to contribution limits for your retirement plan. Knowing your tax rate will help determine how much you can save in a tax-advantaged retirement plan and how much you can expect to pay when tax time arrives.

The IRS changes retirement contribution limits depending on your age and income. Be sure to know how much pre-tax income you can contribute to your retirement savings before you hit the limit. If you contribute too much to an IRA or 401(k), you can correct the mistake by having your plan administrator refund your extra contributions, known as excess deferrals. Your excess deferral will then be counted as income the year the contribution was made.

Understand volatility comes and goes and that is a normal function of financial markets. During periods of heightened volatility, investors tend to panic and sell when stocks are low. There is an old adage that financial advisors like to use – “buy low, sell high.” When stocks move lower, this is when a lot of experienced advisors and investors “shop” for stocks at a discount.

Knowing your interest rates and paying off your highest interest loans first is the best strategy for getting out of debt. Before signing any new credit cards or loans, be sure you read all the fine print in terms and conditions. If there is anything you don’t understand about a loan, talk with your financial advisor or CPA so you do not miss anything material. Be wary of any high-interest credit cards. Most successful savers we know tend to have very low credit card balances.

Most people know that you can’t get a mortgage, apartment, car or pretty much any other asset without having your credit score checked. The higher your score, the better interest rate and terms you will receive. There are great resources to checking and improving your credit score. One of them is Credit Sesame where they will inform you automatically of any change in your credit score or credit alerts. If you are rebuilding your credit, sign up for one of these services and work diligently towards paying off your debt.

Start as early as possible and take advantage of the time value of money. One of the most important concepts in finance is compound interest which means that the interest or return you earn each year is added to your principal, so the balance grows at an increasing rate.

It’s important to have a realistic view of your finances and budget yourself in a way that allows you to pay for your living expenses and put money away for retirement. Whichever way you decide to budget, be sure to maintain consistency and update it on a monthly basis. You might be surprised how much you can keep on track with your finances with a little upfront organization and planning.

Pay yourself first. Whether it’s 10%, 20%, 30%, or even 50%, commit a monthly percentage of your earnings to savings. If times ever get tough, you will have a backup and this will also help put money away for retirement, vacations, home repairs, health expenses, etc.

Markets are driven by a multitude of factors including interest rates, policy decisions, earnings, economic reports and more. It can be tempting to make investment decisions based on one piece of news but always remember the reasons you invested in a company or security product. This will help keep you calm and make decisions based on a well thought out plan, rather than a gut reaction.

Financial planning doesn’t have to be complex, it can be simple. Keeping it all together and looking at the big picture of your finances is critical to attaining your goals. Working with an experienced financial advisor and proper financial planning can mean the difference between meeting your retirement needs and falling short.