New Year’s Resolutions

1. I WILL ESTABLISH A REALISTIC MONTHLY BUDGET FOR SAVINGS AND EXPENDITURES. It is important to understand where your money comes and goes. Identify all of your expected sources of income for the New Year and also honestly project your expenses. This includes the regular monthly bills paid, plus those one-time items both planned and unplanned. Remember to pay yourself first as saving is the key component to wealth accumulation.

2. I WILL ESTABLISH A LONG-TERM FINANCIAL PLAN. If you do not have one, today is the best day to start building one. Whether you are 40, 60 or 80 years old you need to look beyond next month and decide where you want to be financially 5, 10 or 20 years from now.

3. I WILL ADOPT A LONG-TERM INVESTMENT APPROACH. If 2012 taught us anything it has to be that market timing is a futile exercise. We all like to think we are smart enough to be in the market when it is going up and out of the market when it is going down. Reality is the vast majority does exactly the opposite. Stay with your plan and stay invested. The markets reward patience.

4. I WILL INVEST AT A RISK LEVEL APPROPRIATE FOR MY SITUATION. Too many people do not have enough risk in their investment portfolios. It is important to understand that long-term wealth accumulation comes from ownership, i.e. investing in the stock market. Money market funds and CDs can provide needed liquidity and bonds can provide some stability to a portfolio, but stocks provide growth. This asset allocation decision is the most important investment decision. Forget 2008 and move forward.

5. I WILL REMAIN CALM AND CONFIDENT. Fear and greed are the emotions that can derail the best of financial plans. The 24/7 barrage of information from television, internet, e-mail, tweets, magazines and the old fashion newspaper can prevent you from investing properly if you let it get inside your head. Turn down the noise and be confident in your long-term financial plan.

6. I WILL FOCUS ON THE THINGS UNDER MY CONTROL. What happens in the stock, bond or commodity markets in 2013 is totally out of your control. The average investor will spend 95% of their time worrying about what the markets are doing or will do. Instead of getting caught in this trap, spend your time monitoring your financial plan, your spending, your savings rate and your asset allocation decision. As time marches on, these things under your control will make all the difference.

As we begin a New Year, think about taking a new approach to your financial future. Become a long-term planner and a long-term investor focused on the things you can control. You will be wealthier and healthier as your portfolio increases and your blood pressure decreases.

Posted on January 3, 2013
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