Ah, January 1: a day of fresh starts, new beginnings, and big dreams. According to Fidelity’s Tenth Annual New Year Financial Resolutions Study, 32 percent of survey respondents are considering making a financial resolution for the year ahead. The top three financial resolutions are to save more (48 percent), pay down debt (29 percent) and spend less (15 percent).
While those are great resolutions, they also are broad and lack detail. How much do you want to save? Which debts will you pay down first? How exactly will you spend less? Without a firm plan in mind, these resolutions easily may be forgotten by the time Valentine’s Day rolls around.
When it comes to New Year’s resolutions, it’s important to set specific, measurable, and achievable goals. In other words, you want to create a detailed plan with milestones that can be met. That way you will see the progress you’re making throughout the year and maintain the motivation to keep going.
With that in mind, here are a few smart money moves you can make in the coming year.
- Check your credit report. This one should be a no-brainer, but many people put it off until trouble arises. Don’t wait until you’re ready to apply for a car loan or home mortgage; get your free copy of your credit report at AnnualCreditReport.com months in advance so you can address any discrepancies. You can request a free copy of your report once a year from each of the three major credit reporting companies. Keep in mind that you can order the three reports one at a time, allowing you to check your report multiple times throughout the year. Once you get your copy, review it and make sure all the information is accurate and up-to-date.
- Make sure your insurance meets your needs. How much life insurance do you need? Do you need disability insurance? What about long-term care insurance? These aren’t easy questions to answer, and the answers generally depend on your individual situation. While determining the type and amount of insurance you need can be overwhelming, it’s a vital part of protecting you and your family. Generally speaking, it’s easier to pay a little bit each month in premiums than to come up with a large sum in the event of an emergency.
- Get the best credit card for you. Whether you use your credit card only for major purchases or put everything on it and pay it off each month, it’s important to make sure the card in your wallet is the best one for your needs. If you have to carry a balance sometimes, you want to make sure you use a card with the lowest rate possible; if you travel a lot, you’ll want to look for a card that’ll make your vacations a little more affordable. Sites like NerdWallet and WalletHub can help you find the credit card that best meets your lifestyle.
- Fully fund your emergency fund. Make this the year you build your emergency fund to the recommended six to eight months of living expenses. It sounds difficult, but remember, we’re talking about your monthly expenses, not your monthly salary. Calculate the amount based on your true necessities: mortgage/rent, utilities, food, insurance, and the like. If it helps keep you going, break this goal down into smaller milestones you can meet throughout the year, and celebrate each accomplishment along the way.
- Put all your financial documents in one safe place. Last but not least, take the time to gather together all your important financial documents and store them in a secure place. InsureYouKnow.org is the ideal location. Think of it as an easy-to-use electronic safe deposit box; you upload your documents, and only you and anyone you share your password with can access them. Thanks to Amazon’s cloud encryption, you can rest easy knowing your documents are safe and easy to access whenever and wherever they’re needed.
The whole reason you got life insurance was to protect your loved ones. But if you’re not careful, your life insurance money may not end up in the hands of the individual you intended.
Naming your beneficiaries sounds like a simple enough process, and in general it is. The problems arise when you don’t provide enough information about your beneficiaries or your life circumstances change (and trust us, circumstances always change).
Here are four reasons you should check—and double-check—your beneficiaries today.
- Your beneficiary has a common name. According to Ancestry.com, there are 38,313 James Smiths and 32,092 Maria Garcias in the United States. If it’s not immediately clear which James Smith or Maria Garcia you selected as your beneficiary, things can get complicated very quickly. Even if it seems clear to you, it’s better to err on the side of caution. Include Social Security numbers and addresses for your beneficiaries so there is no question about who will receive the proceeds of your life insurance policy.
- You get divorced and/or remarry. After a painful divorce, you’ve met and married the love of your life. Congratulations! Unfortunately, your life insurance company wasn’t invited to the wedding. After major life changes like a marriage or divorce, you’ll want to update your beneficiaries. Otherwise, your ex may get a sudden windfall while your beloved spouse ends up with nothing.
- You have another child. You thought you were done having children. Surprise! In between diaper changes and much-needed naps, be sure to add your new baby to your policy as soon as possible. Note that minors may not receive a life insurance payout. Until your child is an adult, you’ll need to name a custodian, guardian or trust as the beneficiary. Even if your child legally is an adult, you may want to consider establishing a trust to manage the proceeds until your child hits 25 or 30.
- Your primary beneficiary dies before you do. There are two types of beneficiaries: primary and contingent. The primary beneficiary is the individual who will receive the proceeds of your policy, while the contingent beneficiary is in place in case your primary beneficiary dies. If your primary beneficiary does indeed die before you, it’s a good idea to update your beneficiaries and make sure you still have both a primary and a contingent beneficiary.
There are a few other things to keep in mind when it comes to naming your beneficiaries. First, remember that your life insurance policy is a contract, and as such, the life insurance company is obligated to give the proceeds of your policy to whomever you named as your beneficiary no matter what another document says. In other words, your life insurance policy supersedes your will. Make things easier on everyone and be sure your wishes are reflected correctly in both documents.
Second, you can name multiple primary beneficiaries. To keep things simple, it’s a good idea to assign percentages to each beneficiary rather than a set dollar amount.
Finally, as with all estate planning, communication is key. According to Consumer Reports, 1 out of every 600 people is the beneficiary of an unclaimed forgotten or misplaced life insurance policy. Make sure your loved ones know you have a life insurance policy. Tell them you have uploaded it to InsureYouKnow.org, and let them know how to access it. The last thing you want is for all your careful planning and preparation to go to waste.