10 Easy Financial Resolutions for the New Year

New Year’s resolutions don’t all have to be about going to the gym, eating five fruits & veggies a day, or spending less time with Dr. Phil. Here are ten financial resolutions to consider.

1. Get Organized
Set up a records center, perhaps a fireproof file cabinet sectioned into financial categories. Determine how long you need to keep each type of document (it depends on what it is) and make up a master list detailing what’s where. Then, tell someone else you trust where to find the list in case of an emergency.

2. Learn More About Your Money
Visit the local library and find the personal finance shelf. While you’re at it, pick up a 1-year subscription to a personal finance magazine and enjoy 12 months of education and enlightenment. Also, be sure to frequent the top personal finance websites such as Yahoo Personal Finance, USA Today Money, and Lightship Mutual (a cheap plug, we know.)

3. Analyze Your Cash Flow
Every financial plan begins with a thorough understanding of where money is coming from, and where it is going. In order to be successful–whether you are a struggling young professional or a multi-national corporation–cash flow monitoring is critical. Many banks now provide online spending/budgeting tools for you to use at no additional cost. Actually, it doesn’t have to even be that complicated. Many people still use a computer spreadsheet or paper journal to keep track of the money trail.

4. Improve Your “Soft Skills”
This one doesn’t seem to fit at first, but your ability to earn income is the lifeline of your financial being. Without income, how can you purchase investments, insurance, and other needs? As a result, you must find ways to increase your professional appeal by improving the skills most employers want. Speak, listen, lead, collaborate…master these traits, and find yourself indispensable to the team.

5. Create an Emergency “Rainy Day” Fund
Aim to establish an emergency fund equal to 3 to 6 months of your living expenses in case you experience a sudden loss of income. You might accomplish this by increasing income with a second job and/or decreasing discretionary expenses. Be sure to find the best savings account to stash this cash.

6. Increase Your Retirement Savings
If you participate in a retirement plan such as a 401(k) or a 403(b), contribute the most you possibly can–particularly if your employer matches some or all of your contribution. Salary deductions are made on a pretax basis, and any investment earnings grow tax deferred until they’re withdrawn. And if your 401(k) or 403(b) plan allows after-tax Roth contributions, qualified distributions of your contributions and earnings will be completely tax free.

IRAs also feature tax-deferred growth of investment earnings. Traditional IRAs may help lower your present taxable income if you’re eligible to make deductible contributions. Withdrawals (unless you’re withdrawing nondeductible contributions) are taxed as ordinary income, however. Roth IRA contributions are not deductible but, like Roth 401(k)s, qualified distributions are entirely tax free.

7. Review Your Investment Portfolio
Is your asset allocation still in line with your investment goals, time horizon, and risk tolerance? Is it time to rebalance your allocation in light of changing market conditions and/or your changing needs? Are you taking appropriate advantage of new investment products? Reviewing your portfolio periodically can help you stay on track.

8. Check Your Insurance
You may want to review the terms of your insurance coverage–not just your life insurance, but also your auto, health, disability, and homeowners insurance. Are you adequately protected, given your circumstances? Is there coverage you really ought to have (such as personal umbrella liability or long-term care insurance), but don’t?

9. Update Your Estate Plan
If you have children or a large estate (over the applicable exclusion amount of $2 million for 2008), you should consider reviewing your estate plan. (If your estate is smaller, you should review your plan at least every five years.) Your estate plan should be reviewed in light of certain life events, such as changes in employment, changes in family circumstances (marriages, divorces, births, illness or incapacity, and deaths), or even significant changes (greater than 20%) in the valuation of the estate.

10. Seek Assistance
There are many reasons to work with a financial professional. Ultimately, a qualified financial planner can help you keep all these resolutions–giving you more time to focus on your health, career, friends, and family.