(WTNH) - It's the start of a new year and it's the perfect time to set some resolutions for you financial future.
Investment advisor Craig Ferrantino gives the following four financial resolutions for 2012.
1) Check and edit your credit.
- Every year you should be checking your credit to make sure everything is current and correct. This will help identify and stop fraudulent activity and any errors that need to be corrected. Credit is king, so be sure you know what yours looks like.
2) Establish a rainy day fund.
- When it rains, it pours, which is why it's so important to make sure you have a rainy day fund set up for those financial emergencies that seem to pop-up when you least expect them.
- It's recommended that you have three to six months worth of salary in a liquid account. It's a lot easier and cheaper to pull cash from your savings in the event of a financial emergency rather than rely on your credit cards, personal loans, and other money borrowing avenues where you have to pay interest and can be assessed late fees if you are unable to make a payment.
3) Pay yourself first in 2012.
- Annual 401(k) contribution limits were increased from $16,500 to $17,000 this year, giving you the opportunity to put more away for retirement. If your employer offers free money, you might want to consider matching it.
- If you have an IRA, and you are under the age of 50, your contribution limit remains the same at $5,000 and if you are over 50 it's still $6,000 in 2012. However, Roth IRA income limits have increased. The income limits for making contributions to a Roth IRA will be between $110,000 and $125,000 for singles and heads of household in 2012, up $3,000 from 2011. For married couples filing jointly the income limits will increase by $4,000 to a phase out range of $173,000 to $183,000.
4) Invest for the long haul and short.
- Short term financial goals are very different from long term financial goals and so are the investing strategies that will help you achieve them.
- If you have a long term goal, such as accumulating wealth to buy a house in 10+ years or retire in 10+ years then investing in the market may make sense for you. However, for those short-term and medium-term goals, such as buying a house in two years or retiring in five years, the market isn't probably where you want to be.