By Bill Gordon, AIF®

It’s the New Year again, and that means it’s time to make goals for 2018. Chances are your resolutions will include at least one financial objective. If not, they probably should. In this post, we’ll cover five of the top financial goals you should be making for the coming year to find yourself master of your money during the next trip around the sun.

  1. Well-Stocked Emergency Fund

Financial experts agree; you need to have an emergency fund that can see you through difficult circumstances and provide the financial resources you need to pay for unexpected expenses. It could be that you need a new HVAC unit or perhaps need living expenses after experiencing a layoff. Having an emergency fund means you do not have to rely on credit cards or dip into your retirement accounts to weather the storm.

Typically, an emergency fund should be a highly liquid account – not sitting in volatile equities or tied up in long-term investments. Although there are varying recommendations on how much you should have, we recommend calculating your basic expenses, including housing, food, utilities, healthcare, transportation, and other essential costs. Then, multiply your living expenses by several months (most experts recommend three to six months).

  1. Have Adequate Amount of Insurance

You may not think of insurance as a financial asset, but it could one day provide the greatest return on your money of any investment you ever have. That is because insurance has the capacity to save you from financial ruin, whether due to a major health crisis, a car accident you cause, or perhaps even a death in the family. Consider this:

  • A cancer diagnosis could result in hundreds of thousands of dollars in treatment costs.
  • Bodily injury liability can cost hundreds of thousands or even millions in judgments and legal fees
  • Losing a family’s primary source of income could put dependents at risk of an unstable financial future

Going into the New Year, set a goal of meeting with an insurance agent to review your coverage needs and make updates to your policies as necessary.

  1. Live on Less Than You Earn

If your goal is to end 2018 with more money in the bank than you have started, you’ll have to spend less than you earn. While it may seem like obvious advice, the fastest way to go into debt or miss your savings goals is pay more money than necessary for things you do not need.

First, evaluate your spending habits to determine where your money is going each month. Then, set a budget and trim back your spending to stay within your financial boundaries. Document where every dollar is spent, perhaps by using a financial app or software. Finally, if you get a raise, do not increase your standard of living to meet your new income. Instead, continue living within your previous budget and use the excess money to get out of debt or build your savings.

  1. Get Out Of Debt

Nothing gives you a better and more reliable rate of return than debt repayment. If you are saddled with credit card debt or loans, you could be paying as much as 20 percent or more every year interest. On a balance of $10,000, that is $2,000 per year. Furthermore, it could take you many years to eventually pay the debt if you only pay the minimum required payment every month. If you instead had that extra $2,000 to invest every year for 20 years at a hypothetical 7% return, it would grow to more than $87,000.

  1. Set Your Retirement Goals

Finally, create a plan to boost your retirement contributions and maximize your tax benefits. Retirement savings takes priority over other types of savings, such as college savings. Although a child’s college years may come first, they can always borrow for education. You cannot, however, borrow your retirement. Every little bit counts, and the sooner you begin saving, the better.

If your employer matches contributions to your 401k, for example, consider increasing your contributions next year to achieve the full match. Be sure to consult with a tax advisor regarding the type of personal retirement account that may best benefit you both now and in the future. Depending on your income, employment status, and expected tax bracket in retirement, you may consider opening and contributing to a Roth IRA, traditional IRA, SEP-IRA, or some other tax-advantaged account.