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Personal Finance

Recharge Your Financial Resolutions

new year's resolutions

The ball has dropped, and a new year has begun. Many view January as a time to make a fresh start and bid farewell to bad habits. In thinking about your New Year’s resolutions, have you considered whether you’re making financially healthy decisions?

Now is a great time to check on your investments, revisit your budget, and improve your overall financial wellness. Read on for six tips to boost your financial savvy for the year ahead.

1. Get Organized

First, make sure your financial files—be they digital or hard copy—are in order. If you don’t log in to all your accounts regularly, make sure you’re still able to sign in and access your statements. If you receive paper copies, shred what you no longer need after you file current documents.

Also, take this opportunity to check your credit score. A measure of how likely you are to pay back a loan on time, this number can have a big impact on your financial life. Your credit score can affect how much interest you pay on a loan, the limit on a new credit card, your required security deposit for a new apartment, and more.

Many credit card companies and financial institutions offer free credit score access, and some even offer complimentary credit monitoring to inform you of changes to your score and alert you to any potential suspicious activity. Alternatively, many websites allow you to check your credit score for free, but be sure to read the terms carefully before providing any personal information.

For more detail on how your score is calculated, your credit report provides a summary of your credit account and payment history. Check out, the only resource authorized by federal law to provide free credit reports from each of the three major credit bureaus: Equifax, TransUnion and Experian. You can request one report from each of the credit bureaus once every 12 months.

2. Draft Your Budget

With your documents in order, start making a budget. Rising inflation might have caused financial strain this past year, as price increases impacted everything from rent to gas to groceries. And when your cost of living is going up, a budget is especially critical. If you already have one, take time to reevaluate. Do you have new or increased expenses? Are you expecting a raise?

According to the FINRA Investor Education Foundation's 2021 National Financial Capability Study (NFCS), roughly one in five respondents (19 percent) reported spending more than their income, and over half (56 percent) said they feel anxious about their finances. If that sounds familiar, creating an accurate budget might help.

Make sure your budget is realistic—a plan doesn’t do any good if you can’t stick to it—and includes savings. Among NFCS respondents, only 53 percent reported having a rainy day fund in case of an emergency. If money is tight, start with just a few dollars a week; it may not seem like much, but every little bit counts.

3. Update Your Goals—and Your Portfolio

After developing your budget, think about your savings goals. Is there room to boost your retirement saving? What other financial milestones—building a kid’s college fund, securing a down payment for a house—are important to you right now? Think about your short-term goals as well to help prevent your long-term goals from feeling overwhelming.

Once you’ve clarified your goals, make sure your portfolio is optimized to accomplish them. As you check the performance of your investments, you might find that your investment mix shifted throughout the year. If so, now could be a good time to rebalance.

When you rebalance, you restore the asset allocation in your portfolio to your original target or adjust it to fit any revision you might have made to your investment objectives. The goal is to maintain your desired risk level and keep your portfolio diversified.

Rebalancing isn't always easy. You might not feel great about selling securities that are doing well or investing more in an asset class that has flagged. But just because an investment performed well in the past doesn't mean it will do well going forward.

4. Wait Out Market Volatility

The past year demonstrated the potential volatility of investing: The stock market has seen dramatic swings, and inflation and interest rate hikes have stirred fears of a recession. Seeing investment account losses can be stressful and might lead some investors to turn toward riskier behaviors, such as purchasing volatility-linked products, day trading or trading options.

According to the NFCS, interest in higher-risk investments such as options or cryptocurrency has increased, particularly among younger investors. Alarmingly, investors who had invested in options or on margin were more likely than those who hadn’t to get questions about those topics wrong on the study’s investing knowledge quiz.

The potential for high returns might make high-risk investments sound appealing, but you should never invest in something without understanding how it works and the risk involved. And a volatile market isn’t necessarily the time to make major changes; it’s usually wiser to stay the course with a well-balanced and diversified portfolio.

5. Examine Your Fees

Even products that seem straightforward can be misunderstood if you aren’t careful. One factor that’s often overlooked: fees. Thanks largely to the emergence of online trading platforms, fees are often less than they used to be, and many brokerages offer commission-free trading. But investing still usually comes with some costs.

However, in the most recent NFCS, 21 percent of respondents said that they don’t pay any fees, and 17 percent don’t know what fees they pay. Since these fees are often deducted from earnings, they can be easy for investors to miss. And that can have big consequences. Even a 1 percent difference in fees can add up to tens of thousands of dollars over 20 years. It's worth your time to find out what you’re currently paying in fees and if cheaper options are available.

To get started, check out FINRA's Fund Analyzer tool. It can help you understand the impact of fees and potential discounts on more than 30,000 products by running a wide variety of investment scenarios to calculate how a fund’s fees, expenses and discounts affect its value over time.

6. Protect Your Money

There’s a lot to consider when investing, and your finances are too important to leave to chance. Consulting a reputable source—such as a registered financial professional  who understands your investment goals —can help you make the most of your money.

The rise of “finfluencers” and social media investing channels offers easy access to financial advice, but an unqualified individual offering unsolicited recommendations might not have your best interest in mind—or worse, might not be offering a legitimate investment opportunity. Know the red flags of financial fraud and be on the lookout for anything suspicious before committing to an investment. Even friends and family might not be the best sources of guidance; just because an investment is right for them doesn’t mean it’s right for you.

Choose an investment professional carefully. Look for someone you feel comfortable with, ask questions and always check their credentials on BrokerCheck.