Fiancially, how would you like to end the year 2016? Maya Kachroo-Levine, Forbes Women, has some interesting ideas on what you can do to remain financial stable, leading to the year 2017.
A financially healthy new year can’t start on January 1, 2017. It’s unfortunate, but it just doesn’t work like that. If you want to start your 2017 off with a clean financial slate, then planning for that needs to start now. For me, a financial clean slate means starting the year with no credit card debt and finalized retirement contributions for 2016. It also means knowing that my first few paychecks of 2017 will go to executing my 2017 financial plan, as opposed to paying off my 2016 debts. Of course, everyone’s version of a “clean slate” in 2017 looks different, depending on their financial situation. However, there are absolutely habits you can implement now to encourage your financial success in the new year.
I spoke with Ken Moraif about what you can do today to ensure your financial health in 2017. Moraif, based in Plano, Texas, is a certified financial planner and the host of radio show Money Matters. He has been in the financial services industry for 28 years and has been named one of the top 100 financial advisors by Barron’s. Here are six financial lessons he emphasizes in the final month of the year.
1. Only take on credit card debt that you can pay back by the next cycle.
Making your family and friends feel special should not directly correlate with a steep increase in your credit card bill. Moraif says, “It is easy to make purchases on a credit card and not keep track of what the total is until you get your credit card bill, but it is very unwise to do so. Always make sure that you can pay off the entire balance on your credit card before any interest charges come due. We live in a consumer-driven society and there is pressure to spend, but I believe there is no shame in living within your means.”
2. If you’re retired, debt shouldn’t factor into your holidays.
“We tell clients that when they are retired, their debt should be retired as well,” says Moraif. Starting 2017 off on a positive financial foot means protecting your wealth at the end of the year, even when there’s temptation to let it get out of hand.
3. Don’t skip out on income tax planning.
It’s easy to forget about personal financial planning during the holidays, especially when you have family in town and are taking time off work. Moraif gives us a quick run down of some things to keep in mind: “Some of the actionable items to review include maximizing retirement plan contributions, identifying opportunities for capital gain and loss harvesting, exploring all Roth conversion and recharacterization opportunities and reviewing RMD timing. In addition, year-end is a time for individuals to consider charitable gifting and maximize annual exclusion gifts.”
4. Don’t rationalize spending twice your “fun budget” just because it’s the holidays.
It isn’t just gifts that run your credit card balance up during the holidays. It’s holiday parties, expensive dinners because friends and family are in town, New Year’s festivities, and more experiential fun. Moraif urges his clients to not let the “eat, drink and be merry” adage tip their financial scale.
5. Don’t wait until the end of the year to max out your retirement accounts.
According to Moraif, “It is a better financial practice to fund it throughout the course of the year so that the money has a longer period of time to grow. Waiting until the end of the year to do so loses that whole years’ worth of growth.”
Moraif also suggests starting off the year by setting up automatic contributions you feel comfortable with. “One of the best things that people can do is make sure that starting in January they are funding their IRAs and their retirement plans at work on a monthly basis. By doing that, people will remove willpower from the equation and put it on automatic pilot. It is amazing how setting it up for monthly contributions adds up over time,” he says.
6. Don’t equate your children’s happiness to money.
If you’re encouraging your children to value the holidays because of expensive presents, then it’s possible that you’re setting them up to always want to buy more, instead of feeling satisfied with thoughtful gifts. “There is a tendency to think that happiness comes from spending a lot of money, but the old adage that ‘money doesn’t buy you happiness’ is true,” says Moraif. “During the holidays it should be more about spending time together, having fun, and creating memories. Many times the best memories are created by doing things that are free or are relatively inexpensive. A family picnic is something that will be remembered for many, many years.”
“The common man prays, ‘I want a cookie right now!’ And God responds, ‘If you’d listen to what I say, tomorrow it will bring you 100 cookies.” ― Criss Jami,