With a new year comes a clean slate, fresh start, and new ambitions. Many people choose to channel their energy into eating healthy, exercising, or learning a new skillset; but now is the perfect opportunity to assess your financial situation and set a few strategic personal finance resolutions for 2020. While you are not likely to achieve these longer-term goals overnight, a bit of progress over the next 12 months can make a positive difference.
Here are a few ideas:
1. Reduce Debt
Nearly 55 percent of American adults with credit cards have debt. If you fall into this category, repaying that debt should sit high atop the list of resolutions for the new year. Even carrying a small balance can greatly hinder both your financial flexibility and ability to borrow money. Start by listing all your debts and prioritizing those with the highest interest rates. Additionally, do not open any new credit cards during this period, even if your intention is to pay the balance down right away. New cards can further complicate the debt situation. Student debt should also be a high priority. Delaying repayment on student loans will only serve to result in more accrued interest down the road.
2. Update Beneficiaries
It is essential for you to review the beneficiary designations for all of your accounts on a regular basis and whenever you experience a major change in your personal circumstances, such as marriage, divorce, adoption, the birth of a child, or death of a spouse. This can help to ensure loved ones are taken care of in the event of something unexpected. However, many people list beneficiaries during an account opening process or at the beginning of a policy but forget to update them for decades. This can lead to an uncomfortable and stressful legal situation where the wrong person may be entitled to the death benefit. Take some time to ensure each of your designated beneficiaries is accurate and up to date. Making changes is easy, generally only requiring a conversation with either your financial institution or account/policy administrator.
3. Invest Sustainably
The practice of sustainable investing (ESG) has taken off in the past several years. In fact, 85 percent of individual investors expressed interested in utilizing their dollars to effect social and environmental change. All you have to do is analyze the financials of a company as you would any other investment, but also look at how the company is impacting the world, both socially and environmentally. For example, ESG investors may only choose to put their money behind companies that curtail carbon emissions or maintain a certain percentage of women on the board of directors. This is a great way to empower corporations that are striving to bring about positive change, while also incorporating your values into investment decisions. And if you are not quite sure how to do it yourself, your financial advisor can help guide you on how to incorporate ESG into your portfolio.
Take some time this holiday season to focus on your finances. Think about where you excel, where you need to focus and establish some realistic resolutions. This approach will help guide your finances in the right direction for 2020 and beyond.
Sabina Sewillo is a Family Wealth Advisor, Vice President and Financial Advisor with the Wealth Management Division of Morgan Stanley in Chicago. The information contained in this column is not a solicitation to purchase or sell investments.
The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.
