Financial Tips for 2019

The beginning of the year is the perfect time to reassess where you stand with your personal finances. You should begin by asking yourself some tough questions, including how much debt you have and whether you are saving enough for retirement.

The first two things you should look at doing are paying off high interest rate credit card debt and high-interest rate student loan debt. This kind of debt is brutal simply because it typically costs you a lot more than home mortgage debt.

As an example, the national average credit card rate across all types of cards is 17.41 percent, according to CreditCards.com. Federal student loans carry an interest rate of 7.6 percent. In comparison, the average 30-year mortgage rate is 4.5 percent. Moreover, mortgage interest is tax deductible.

You most likely have some debt, so consolidate all your debts to the lowest interest rate possible. The simplest way to do this would be to refinance your home and take out enough money to cover all non-deductible debt and pay it off.

Obviously, if you don’t own a home you can’t refinance a mortgage. If that is the case, you should simply shop around for the credit card with the lowest interest rate possible. There is no reason to be paying double-digit interest rates if there are better deals available.

EVALUATE + ESTABLISH YOUR BUDGET IN 2019

Once you have figured out your debt, you should focus on saving some money toward retirement. Odds are that Social Security won’t be providing much to you in 20 to 30 years and most of what you do receive will likely go toward covering Medicare supplemental insurance.

The best way to save for retirement is to sock money away through your 401k plan at work. You kill three birds with one stone: First, your employer may give you a 3 percent to 7 percent match, so this doesn’t cost you anything. Second, any money you put away comes right off the top of your taxable earnings. For example, let’s say you make $100,000 a year and put away 10 percent of your paycheck or $10,000 into your 401k. You’ll only get taxed on $90,000, not the full $100,000.

Lastly, any money you put into your 401k plan grows tax deferred. Over an entire working career of 40 years this can add up to a great deal of money.

Finally, a Roth IRA is another great way to save money for the future. Today you can contribute $6,000 annually into this tax-deferred savings account. The best thing about a Roth IRA is when you retire, you can withdraw the earnings from the account completely tax free. Regular IRAs don’t operate this way – you have to pay taxes on the withdrawals when you take out the money during retirement.

Paying down debt and saving for retirement are two of the best ways to start 2019, especially in light of the uncertainty in Washington, D.C., and the volatility in the stock market.