Money mistakes are a dime a dozen. Except, you know, they end up costing us a bit more than that.
Think More Critically About Your Resolutions
To prevent those costly financial blunders, we asked some financial advisors and professionals what clients tend to get wrong—and you should do differently going into 2019.
Don’t make News Year’s Resolutions. They don’t work.
Set your goals now, or in early January (after the holiday). The goals need to be realistic. This is key. If they are too hard or not remotely achievable, most folks give up before they even start. When setting goals, start small, then move up. For example, if you are contributing three percent to your 401(k) plan, increase it to four percent. Then plan six to nine months down the road to increase it to five percent.
Similarly, if your cash reserve fund is only one month’s living expenses, give yourself a period of time, say six months, to [get to] two months’ living expenses.
Small steps that are actually implemented have a much higher chance of staying implemented. Then you can go from there and again, slightly raise the goal.
The other thing people need to do is check in with their goals. This doesn’t mean following every movement in the stock market. This means reviewing your progress. This should be quarterly.
Pay Yourself First
The tumultuous markets sometimes cause people to quit contributing to their retirement plans, when we should do the opposite and continue to defer into our 401(k) or other retirement plans. If you are worried about volatility, you should still contribute, especially if you are many years away from retirement. Markets have historically gone through periods of decline and subsequently recovered.