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Keep your resolutions in 2014

A month-to-month guide to help you keep your financial resolutions in 2014.

It’s that time of year again—for toasting in the new year and making your 2014 resolutions. But can you keep them?

A new Fidelity survey reveals a growing resolve among consumers. In our fifth annual Financial Resolutions study (PDF),1 we found that 54% of respondents are considering making a financial resolution—up from 46% last year and up from 35% in 2009. Resolve to keep financial resolutions has also increased, with 62% of respondents saying they have stuck with their resolutions—up from a low of 58% in 2010.

“More and more people are becoming aware of the importance of saving and reducing debt,” says J.D. Roth, a personal finance blogger and founder of getrichslowly.org. “Making resolutions is important, but it’s equally important not to bite off more than you can chew. The more resolutions you set, the more likely you are to fail.”

The shift to thrift

This year, 54% of Americans listed “saving more money” as their top financial resolution, versus 52% last year. “Paying off debt” was second, at 24%, up from 19% last year, and was followed by “spend less money” in third place (19%), according to the Financial Resolutions study.

The trend toward saving more comes as no surprise: It is a continuation of the trend that started among American consumers following the economic recession of 2008–2009. The U.S. personal savings rate had grown to 4.9% in September 2013, from 2.9% in September 2007.

Of those surveyed by Fidelity, “developing a long-term plan” and “making or sticking to a budget” have also increased in relative importance this year, capturing the fourth- and fifth-place spots at 13% and 12%, respectively, up from 9% for both in 2012.

Perhaps more interesting is that consumers appear to be shifting toward short-term savings goals (e.g., saving for emergencies and buying a car) vs. long-term goals (e.g., saving for retirement or college). While long-term savings goals still prevail over short-term ones (53% vs. 39%), the gap between the two is shrinking.

Now what about 2014? Consider the Viewpoints month-by-month guide to help boost your financial fitness. Devoting even an hour or two every month can make a difference. And while our guide is meant to link the financial issues to specific dates, there is no special significance to the sequence of these tips. Any time is a good time for keeping your financial house in order.

January: Create a budget

One of the most important things you can do is to create a budget and stick to it throughout the year. Doing so can help you find more money to save. First, review your essential and discretionary monthly expenses and then compare them with your income. Review this information dispassionately and see whether it makes sense for you to cut costs, pay down debt, or save more. And, if you haven’t already done so, start building a liquid emergency fund of at least three to six months’ salary to cover expenses in a pinch.

Helpful tools:

February: Focus on retirement

Retirement is not what it used to be—for many people, it is unlikely there will be one defining day when work stops and retirement begins. And the days of gold watches and comfortable pension plans are long gone for most of today’s workers. The responsibility for managing a variety of imponderables—from how long you’ll live to what the markets and your portfolio will do—falls squarely on you.

Make sure you are saving as much as possible, and that your portfolio asset allocation is not so conservative that it limits your savings growth potential.

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March: Organize your taxes

If you’ve been procrastinating, now’s the time to gather up all your paperwork, W-2 forms, and receipts, and start preparing your 2013 tax forms. The more organized you are, the better, whether you are doing the tax preparation yourself or hiring a professional. For your Fidelity accounts, we provide Fidelity-issued 1099 and 5498 tax forms, Fidelity fund distributions, mailing dates, and other fund-specific tax information. Visit our Tax Center to help complete your returns.

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April: Contribute to or open an IRA

Many tax-planning strategies end when the new year begins, but that’s not the case with an IRA. You can open a Roth IRA or a traditional IRA, or contribute to an existing one, until April 15, potentially reducing your 2013 taxable income, dollar for dollar, subject to phaseouts based on income. The IRA contribution limit for 2013 is $5,500 ($6,500 for those age 50 and older). For 2014, the contribution limits are unchanged.

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May: Revisit your college savings plan

If you have children, now might be a good time either to get started on saving for college or to ramp up your efforts. Consider a 529 college savings plan sponsored by a state or state agency. The contribution limits are high, there are no income restrictions, and your savings grow tax deferred. Better still, you can withdraw the money federal income tax free as long as you spend it on qualified higher education expenses.

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June: Review and update beneficiaries

Because you spend a lifetime building your savings, it’s important to carefully consider who will inherit your assets. In fact, a beneficiary designation can often override instructions in a will. Make sure you review, update, or add new beneficiaries, if necessary, on any retirement accounts you have, such as 401(k)s, 403(b)s, 457 plans, IRAs, Roth IRAs, SIMPLE IRAs, or SEP IRAs. You’ll also want to review beneficiary designations on any nonretirement accounts you may own, as well as assets like your home and your bank accounts.

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July: Give your investments a mid-year checkup

The dog days of summer are a great time to give your finances a checkup. You’ll want to be sure to check your portfolio’s investment mix and revise it if necessary. In fact, it’s probably a good idea to revisit your mix of assets any time your circumstances (financial situation, time horizon, risk tolerance, etc.) change. Also, review the budget you made in January; consider boosting the contribution rate for your 401(k) or 403(b) plan; track minimum required distributions (MRDs) if you are age 70½ or older; and think about paying down high-interest debt. Read our step-by-step guide, no matter what age you are.

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August: Pay down credit card debt

Consider paying down high credit card debt. Borrowing money for things you can’t afford usually gets you into trouble over the long term, because the interest rates you’re paying every month on credit card “loans” can often keep you from getting ahead financially. Smart saving means smart spending, which sometimes means not spending at all.

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September: Consolidate your accounts

Few investors would argue the benefits of diversifying their investments, but there is a time when putting all your eggs in just one “basket” may actually work for the better—for example, when you consolidate your accounts with one service provider. Besides the obvious perks—simplicity and convenience—there are other benefits to combining your assets under one roof. These may include having more control over your asset allocation and diversification, potentially lower fees, higher service levels, and better planning, among other advantages.

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October: Start year-end tax planning

Now’s the time to make sure you are making smart investing moves that may help reduce next year’s tax burden. You’ll want to make sure you are managing investment gains and losses, thinking about increasing contributions to tax-advantaged accounts, and utilizing any tax benefits such as education credits, energy efficiency credits, etc.

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November: Review health and workplace benefits

November is often the time when companies offer open enrollment for health and life insurance plans. Perhaps you’ve changed jobs, gotten married, or welcomed a new baby into the family. If so, make sure you review all your coverage and benefits options to see if they are still meeting your needs. Do the same for your auto and homeowners/renters policies and any others that affect your daily living.

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December: Consider giving to charity

If you’re planning to donate to a number of different charitable organizations, you may want to consider setting up a donor-advised fund (DAF). When you make a contribution (including cash, securities, or even, in some cases, non–publicly traded assets) to a charity that sponsors a DAF program, you are generally eligible to take a full charitable deduction in the year the asset was donated. Donating securities to a DAF can also be easier than trying to donate them directly to a small charity or a number of charities.

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1. This report presents the findings of a telephone survey conducted among two national probability samples, which, when combined, consist of 2,027 adults, 1,015 men and 1,012 women, 18 years of age and older living in the continental United States. Interviewing for the CARAVAN® Survey was completed from November 7 to November 11, 2013, by ORC International, which is not affiliated with Fidelity Investments. Thirteen hundred twenty-six interviews were from a landline sample and 701 interviews were from a cell phone sample. The results of this survey may not be representative of all adults meeting the same criteria as those surveyed for this study.
2. Retirement Quick Check is an educational tool.
3. The UNIQUE College Investing Plan, U.Fund College Investing Plan, Delaware College Investment Plan, and Fidelity Arizona College Savings Plan are offered by the state of New Hampshire, MEFA, the state of Delaware, and the Arizona Commission for Postsecondary Education, respectively, and managed by Fidelity Investments. If you or the designated beneficiary is not a New Hampshire, Massachusetts, Delaware, or Arizona resident, you may want to consider, before investing, whether your state or the designated beneficiary’s home state offers its residents a plan with alternate state tax advantages or other benefits.
4. Portfolio Review is an educational tool.
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The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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