The most important component of any New Year’s resolution is the part where you actually do it. Resolving to do something and then not carrying through only leads to frustration and failure. Why not increase your chances of achieving your long-term retirement planning goals by designing your resolutions better from the start?
Here are three achievable New Year’s resolutions that can help you meet your retirement planning goals.
If you’re saving less than $100 a month for retirement or not saving at all, it’s really hard to carry through on a resolution to save $500 a month for retirement this year. Your likely best case is to try it for a few weeks, realize your goal is not attainable, and – like nearly everyone else – give up on your one-month old resolution.
Increase Your Savings Rate, Slowly
Instead, make your resolution realistic. Commit to raising your savings rate by a meaningful but reasonable level. If the goal is too easy, then it isn’t much of a resolution. But again, if your target is out of reach, you’re likely to throw the baby out with the bathwater, leaving you with less for your retirement.
The easiest way to implement this resolution is to increase your contribution rate in your 401(k) plan. If you don’t have a 401(k) plan at work, set up an individual retirement account or a Roth IRA right away and ask how to automate your savings. Taking any one of these actions will help you create and stay with your new, better, financial habits.
Get Emotions Out of It: Write Down Your Investment Strategy
During an investment downturn, many people abandon their long-term investment strategy because they forget that they had a strategy in the first place or overlook the fact that their plan actually contemplated periodic bad markets. As a result, these people sell securities at their relative low points, locking in recent short-term market losses.
This year, resolve to write down your long-term investment strategy. (Unless you’re about to retire or have already retired, the bulk of your money should probably be invested for the long-term). By documenting your investment strategy, you can refer to it during the inevitable down market. So despite the fact that you’re understandably emotional due to recent investment losses, you can look back at your document and see why you invested the way you did. Extra bonus: create your investment strategy during a less emotional time.
Encourage Others to Do What’s Right
You’re determined to make a difference in your retirement. Now get someone else motivated. Start with your spouse. (That will help you too.) Then, have a money talk with your children. Make sure they know the financial basics, like where money comes from. Talk to your parents too, since every year more Americans find themselves taking caring of their elder parents. Often this is a huge- and unplanned - financial burden. Learn what their retirement plan looks like and, as appropriate, share what you can to help them do better. It just might help down the road.
Realistic resolutions can get done. Make sure some of your New Year’s resolutions are profitable ones.
Source: New Year Resolutions For Your Finances by Michael Rubin