Financial Decisions You Should Make Every Year
Money Girl gives advice on 4 key financial decisions that you should review every year.
No matter if you’re a 20-something just starting to learn about money management, or you have decades of experience, improving your personal finances is an ongoing process.
Maybe you’re earning more or less, have a new family situation, or have completely different financial goals than you did last year.
By taking the time to review a few key decisions and tasks on a regular basis, you’ll find easy opportunities to improve your financial life. Yes, it takes a little time. But I promise that the rewards—like having peace of mind, saving more money, and building wealth—far outweigh the effort.
In this episode we'll cover 4 key financial decisions that you should review every year..
Financial Decisions You Should Review Every Year
To achieve financial secuity, don't forgot to reevaluate the following 4 financial decisions at least once a year:
Decision #1: How Much to Save for Retirement
Most people aren’t saving nearly enough for retirement. To make sure you can live comfortably after you stop working, set aside at least 10% to 15% of your monthly gross income for your golden years.
If you have a workplace retirement plan, such as a 401(k) or a 403(b), make it the first place you squirrel away money for the future. Traditional retirement plans give you a nice tax break and a relatively high annual contribution limit.
Already contributing a percentage of your salary for retirement? Consider bumping it up a percentage point or two. And if you receive employer matching funds, always contribute enough to max out the match so you don’t miss that fantastic benefit.
Don’t make the mistake of thinking that you’re too young to plan for retirement, or that you’ll make up the difference when you earn more later on. Young people have a lot to gain by saving early because they can amass a fortune on far less than someone who starts later in life.
In other words, postponing retirement contributions is expensive.
Decision #2: What Insurance Coverage You Need
In order for you and your family to stay safe, it’s critical to have enough of the right kinds of insurance, such as property, health, and life.
Use a site like insuranceQuotes.com to get free quotes from competing companies. Prices can vary considerably over time and also from carrier to carrier. Review your coverage types and amounts every year to make sure you aren’t over- or under-insured for the following types of insurance:
If you die without a will, the courts decide what happens to your possessions and even to your children—not your family.
Auto: Consider raising your liability coverage if it isn’t enough to protect the total of all your assets (such as your home, cars, and non-retirement investments) from a potential lawsuit. Also, raising your deductible lowers your annual premium. Just make sure you’d have enough savings to cover the deductible if you made a claim.
Home: Take an inventory of your belongings and consider what additional coverage you may need so you don’t come up short if you’re the victim of a theft, natural disaster, or lawsuit. Remember that home insurance doesn’t cover damage from certain natural disasters, including floods and earthquakes.
Renters: Your landlord’s insurance never covers your personal belongings or liability. That means every renter should have renter’s policy that protects you from a natural disaster, theft, or lawsuit.
Health: Starting in 2014, having coverage that pays for a portion of your medical costs is a legal requirement under the Affordable Care Act (also known as Obamacare). If you don’t have affordable insurance through an employer, you may be eligible for a plan that’s subsidized by the government, depending on your income.
Life: Consider how loved-ones would pay bills, cover future education expenses, and maintain their current lifestyle without you. If you have a young family, a general rule of thumb is to have life insurance in an amount equal to 10 times your annual income.