5 Actions to Help You Improve Your Financial Habits

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Did you resolve to lose weight, stop smoking or act on another life goal this year? Although it’s only a few weeks into 2017, many people have already broken their New Year’s resolutions. Instead of new resolutions, consider improving your habits, including your financial fitness. Good financial habits are vital for achieving your goals. Five ways to improve your habits are to automate, investigate, calibrate, allocate and participate. And your financial advisor can help reinforce these good habits, which may make a big difference in your financial future.

  1. Automate – Since habits are regular routines, usually triggered in specific situations, you can break some bad financial habits by using automatic payments and other repeatable processes.
    • Pay yourself first by adding automatically to your investments each month – systematic investing can help take the emotion of market moves out of your decisions, although it doesn’t guarantee a profit or protect against a loss. Systematic investing allows you to invest a fixed dollar amount at regular intervals.
    • Set automatic payments to pay your full credit card balance monthly or at least pay more than the minimum amount.
    • Consider paying extra on your mortgage.
    • Make sure you spend less than you earn.
  2. Investigate - Do you frequently react to financial advice aimed at others or the general public? It can sound impressive or enticing, but it may not be right for you. A better habit is to ask what will help you toward your long-term financial goals. The amount of financial noise seems to be exploding, so make sure you investigate to eliminate “fake news” and don’t follow recommendations that aren’t designed for you.
  3. Calibrate – While the S&P 500 and the Dow are useful measures of how U.S. large-cap stocks are performing, they aren’t all you need to know. That’s why a possibly harmful financial habit is checking your portfolio’s performance against the S&P 500 or the Dow. Why? Because a stock market index isn’t tailored to your situation or aligned with your goals. It’s more volatile than you may want for your portfolio. And the more frequently you check how you’re doing, the more likely you’ll be inclined to make changes. Comparing your portfolio to a stock index is like comparing your life to a celebrity’s – most of us don’t have the ups and the attention, but we also don’t want the emotional swings that result.
  4. Allocate – It’s easy to get in the habit of investing in what’s familiar – especially stocks of large, well-known U.S. companies. They’ve performed extremely well over the past few years; however, market leaders rotate over time. Make it a habit to allocate money to asset classes that have lagged recently, even though they may be less familiar. That way, you can reallocate and help improve your portfolio’s diversification. Some investments to consider are international developed-market and emerging-market stocks, as well as investment-grade bonds. Remember, stock and bond prices frequently move in opposite directions, so it’s key to combine them as the foundation of your portfolio.
  5. Participate – One of the most important financial habits is to stay fully invested. It’s always tempting to hesitate, but that’s rarely a successful strategy. And failure may be more likely if you try to make huge changes or do it by yourself – but you’re not in this alone. Just like you’re more motivated to keep exercising if you walk with friends, you’re more likely to stick with good financial habits when you have your financial advisor to help break down your big goals into practical actions and stay consistently by your side along the way.

Take Action Today

Many of your best habits are automatic because you don’t have to think about them. And good financial habits can become as ingrained as brushing your teeth – but fortunately, your financial health can improve without doing anything twice a day. Regular checkups with your financial advisor can help you stick with your strategy and work toward your long-term financial goals.

Important information:

Diversification does not guarantee a profit or protect against loss.

Investing in equities involves risks. The value of your shares will fluctuate, and you may lose principal. Special risks are inherent to international and emerging markets investing, including those related to currency fluctuations and foreign political and economic events.

Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.

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