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By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, [email protected]

The first month of the new year is a great time to help service members develop New Year’s resolutions; a.k.a., financial action plans. Take the time to review their progress toward future financial goals and make recommendations to enhance their overall financial security. Below are 25 personal finance improvement strategies to discuss with military families:

  1. Set Specific Financial Goals– Determine what you want, when you want it, and how much it costs (e.g., $14,000 for a car in 2020). Once the goal is specific, divide the time frame into the dollar cost to determine the required savings.
  2. Calculate Your Retirement Savings Need- Use a tool such as that includes factors such as age, life expectancy, sources of retirement income, and the value of existing savings (e.g., IRAs).
  3. Increase Retirement Savings– Save at least the amount of employer match and more, if possible, up to the IRS limit. Matched savings is “free money.” Savings of 1% more of pay can grow to thousands of additional dollars later.
  4. Live Below Your Means- Spend less than you earn and use the difference to reduce debt and/or save and invest for emergencies and future goals. Track expenses to see where money goes and adjust spending to free up cash.
  5. Build Liquid Cash Reserves- Calculate a liquidity ratio, a measure of the adequacy of emergency savings, by dividing liquid assets (from a net worth statement) by monthly household expenses. The ratio should be 3:1 or better.
  6. Pay Yourself First- Treat savings and investments with the same priority given to a mortgage, rent, or car loan payment. Save and invest automatically through an employer retirement savings plan and other automated deposits.
  7. Invest for Long Term Growth- Put history on your side. Past investment performance data show a higher return in stocks, or growth mutual funds that invest in stock, than for any other asset class (e.g., bonds) over the long term.
  8. Harness the Power of Compound Interest- Calculate the number of years to double a sum of money by dividing 72 by the rate of return (example: 72 ÷ 6% = 12 years). The longer and more frequently money compounds, the better.
  9. Keep It Simple– Consider a “total stock market” mutual fund that tracks U.S. companies and a “total international” fund that provides exposure to companies overseas and the TSP lifecycle (L) fund for “low maintenance” investing.
  10. Develop an Asset Allocation Strategy– Split money among asset classes. An example is 50% stocks, 30% bonds, and 20% cash assets. Keep the portfolio close to its target allocation and rebalance when target weightings shift.
  11. Keep Good Financial Records- Prepare a file folder for each stock or mutual fund owned. Save annual summary statements that list deposits and investment earnings to help calculate your capital gain or loss when shares are sold.
  12. Review Your Insurance- Contact an insurance agent to make sure you are adequately covering “big ticket” risks, such as liability, disability, health care expenses, loss of a breadwinner’s income, and destruction of your home.
  13. Revise Your Tax Withholding- Consider revising your W-4 form to increase take-home pay and minimize potential tax refund delays resulting from identity theft. Use the extra income to save and/or reduce debt.
  14. Maximize Tax Breaks – Consider strategies such as deposits to tax-deferred retirement savings plans, tax-free municipal bonds, tax credits and deductions, and long-term capital gains taxes on investments held more than a year.
  15. “Bunch” Itemized Tax Deductions– Shift payment of tax deductible items (e.g., charitable donations) from one calendar year to the next to be able to itemize every other year if you are close to the standard deduction limit amount.
  16. Calculate Your Net Worth– See where you stand financially at year’s end with a net worth statement. Subtract the amount that you owe (debts) from the value of everything you own (assets). The difference is your net worth.
  17. Take the Wealth Test- Use the formula from The Millionaire Next Door with two key factors: age and gross income. Multiply these numbers together and divide by 10. The result is what your net worth should at least be equal to.
  18. Shop Smart- Question your motives before spending money. Ask yourself “Do I really need this?” When you purchase a product or service, follow the “Rule of 3” and get price quotes from at least three stores or professionals.
  19. Borrow Smart- “Shop” at least three lenders before applying for credit. Compare the annual percentage rate (APR), various fees (e.g., late fee), and other features (e.g., rewards programs) and repay the amount owed quickly.
  20. Check Your Credit– Review your credit report annually from the central site that allows consumers to request free credit reports from the major credit bureaus (Experian, Equifax, and TransUnion):
  21. Get Educated About Money- Take time to learn about personal finance. Suggested learning methods are briefings, webinars, financial books or magazines, CNBC, and financial Twitter chats and websites.
  22. Plan Your Estate– Prepare key documents including a will, living will, and power of attorney. Remember that everyone has an estate plan: either one they prepare themselves or one established by their state of residence.
  23. Develop Financial Resilience – Build financial resilience with adequate savings, low household debt, marketable employment skills, and a social support system. Resilience is the ability to “bounce back” when bad things happen.
  24. Take Care of Your Physical Health- Practice good health habits (e.g., diet, physical activity) to decrease the frequency of having to spend money on doctor visits, prescription drugs, and other health care expenses.
  25. Think Positive- Believe in the saying “if it is to be, it’s up to me.” Positive people generally experience greater success than “naysayers” because they see a connection between what they do today and what happens in the future.