Create a positive financial mindset for 2018


The year is not yet over, but many of us are looking forward to January 2018. Starting a new year is always exciting, offering opportunities for making healthy changes. But often, our best intentions have faded within a few weeks, and we fall back into our old routines.

Let’s focus on our mindset to improve our finances in the new year. Maybe your mindset is that you cannot improve your finances because you’ve never been good with money.

We have all fallen short on goals for many reasons. Maybe the goals were unrealistic or we didn’t prepare properly. Sometimes life gets in the way. Brian Grasso, author of the book “Mindset Matters Most,” says, “Changing your mindset is about consistency plus simplicity.”

Today we will look at four ways of changing your mindset involving your finances.

Start a retirement fund

If you struggle to get to the end of the month, and there is never any money left over to save, cut yourself some slack. Chances are, you never had role models (parents or grandparents) when you were a child who taught you how to save. So, you need to learn now.

Ask whether your employer has a retirement plan, such as a 401(k) or a 403(b). If it does, fill out the necessary paperwork and start contributing to it – at least as much as your employer will match. Many employers will annually contribute 3 percent times the amount of your salary if you contribute 6 percent of your salary. Never pass up the match that an employer will contribute.

If your employer offers a Roth 401(k) or a Roth 403(b), choose that option, rather than the traditional retirement plan. You will not receive a tax break in the years you contribute, but the account will be tax-free for future years, including when you decide to withdraw the money.

Retirement plans such as 401(k)s, 403(b)s, Roth 401(k)s and Roth 403(b)s do not have income limitations, but they have contribution maximums. For 2018, a person can contribute up to $18,500 if under age 50 and up to $24,500 if age 50 or over.

Create an emergency fund

Do you have an emergency fund that would cover six months of living expenses in case of an emergency? If you do not, start building your emergency fund.

Open a savings account at a bank or credit union, and make sure you are not paying any fees. If you already have a checking account, open the savings account at the same firm.

Ask the bank or credit union to start transferring money automatically into the new savings account on the day you choose (immediately after you receive your paycheck is usually the wisest choice). Select an amount that is realistic for you. It does not have to be large.

Open a Roth IRA

If you fund your retirement plan at work and you have an emergency fund, congratulations! Next, I recommend you open a Roth IRA. You must have earned income (such as a salary) to fund a Roth IRA. For 2018, you can contribute up to $5,500 if you are under age 50 and up to $6,500 if you are 50 or over. There are income limitations (based on modified adjusted gross income) for funding Roth IRAs to the maximum amount, and for 2018 these are $120,000 if you are single and $189,000 for married couples. See the website for information.

Roth IRAs do not provide any tax benefit in the year of the contribution. However, going forward, the account is tax-free as it is growing and is also tax-free when withdrawals are taken. (Traditional IRAs offer a tax benefit in the year of the contribution but withdrawals are taxed as income in the year of the withdrawal. Therefore, Roth IRAs are considered tax-free while traditional IRAs are tax-deferred).

Someone can fund a Roth IRA in addition to a Roth 401(k) through their employer. Roth IRAs are a very attractive way to save for retirement, but they are also attractive for young people because the contributions can be withdrawn at any time (just not the earnings). Roth IRAs have many benefits. For information, read Wise Tax Strategies on my website, Click on the “Resources” tab, then on “Free Reports.”

Boost your investment knowledge

If you contribute to your employer’s retirement plan, have an emergency fund that will cover six months of expenses, and fund a Roth IRA each year, your next step should be to increase your knowledge about investments. Perhaps you have investment accounts, but you do not understand why you own certain investments or how they perform. Early 2018 is your chance to meet with your broker or financial adviser and ask lots of questions.

Raise your level of knowledge regarding your investments. The stock market has been extremely kind to investors in recent years, but I am always concerned that many investors are not prepared for the inevitable downturn. Make certain your investments do not have too much risk for your situation, and ask for a listing of the fees you are paying. Learn how to analyze your investments. Your broker or financial adviser should serve as a partner to you.

We have all set unrealistic goals before, and we are frustrated when we do not follow through. Mindset is important. Be kind to yourself if you slip back into the old habits, and begin again.

The researchers who study how change occurs emphasize that the process is not linear. We may move from one step to the next and then take several steps back before getting on track again. If we see setbacks as a part of the process, we’ll be more likely to accept them and return to the positive changes we are making.

Best wishes for a happy, healthy and prosperous new year!

To your success,




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