This is the time of year when many of us tend to resolve to be better. We vow to ourselves that we will work on improving our health, our relationships, and our financial condition, among other important things. Here are three smart money moves you can make right now (or very soon) that can have a huge effect on your financial well-being.
Meet with a financial advisor
You might not think that you need a financial advisor, especially if you're not saddled with credit card debt and have some savings in bank accounts and retirement accounts. Well, you may indeed be doing much better than the average American, but a little professional guidance can improve your personal finances even more -- potentially helping you get better off by tens of thousands of dollars, if not hundreds of thousands of dollars.
Seeking some professional help is especially advisable when your life changes in some significant way, such as if you get married or divorced, have a child, change jobs, lose a job, lose a spouse, and so on. But it's also smart at any time, as you may learn that you can save costs or reduce complexity by combining some accounts. You might learn that you're more diversified than you need to be or that many of your investments duplicate each other while ignoring some worthwhile areas such as international stocks. You might get valuable guidance about how to best save for your children's college educations or which retirement strategies make the most sense for you or when you should plan to start collecting Social Security benefits.
There's more peace of mind and better sleep to be had once you've shown all your financial cards to a pro and have learned how on track you are to meet your financial goals -- or have learned what steps you need to take to get there. Some financial advisors do cost more than you might like to pay, but even paying $500 or more can be well worth it if you're saving 10 times that. Many advisors will meet with you for free the first time. That can be a great way to sense how much value they offer you and if you like and trust them. You can find some via the National Association of Personal Financial Advisors, an association of fee-only financial advisors.
Refinance your mortgage
Gobs of people have refinanced their mortgages over the past decade – a generally sound decision, given that interest rates have been near historic lows for quite a long time now. But it looks like interest rates are likely to rise in the coming year as our economy's recovery and growth continue, so if you haven't yet refinanced your home loan, this could be a great time to do it. Conventional wisdom suggests that it's smart to consider refinancing if you can get an interest rate that's 0.75 to 1.0 percentage point lower than your current one. There's a little more to it than that, though.
For one thing, ask yourself how long you expect to remain in your home with your current mortgage. If you're planning to be somewhere else in two years, then though you might save $200 per month in payments, the savings might not exceed the closing costs. Be sure to crunch the numbers, seeing how much you will save and how much refinancing will cost you.
Think also about the mortgage itself. If you're 20 years into a 30-year loan and you refinance into a new 30-year loan, you'll have lower payments, but will be making them for a long time. Know that you can refinance into just about any kind of mortgage -- short-term, long-term, fixed-rate, adjustable-rate, and so on. (If you expect rates to rise, fixed-rate loans should be especially attractive.) You might switch from a 30-year fixed-rate loan into a 15-year fixed-rate loan, which could shrink your payments a little, but have you owning your home sooner and paying much less in interest, too. Read up more on mortgages and refinancing and discuss your options with a mortgage professional or two. A little shopping around could save you a lot.
Get life insurance -- or drop it
Finally, give some thought to life insurance. If you have children or others depending on your income in any way and you're not carrying life insurance, you're putting your loved ones at risk. It's hard to believe that you might die relatively young, but it happens to many people, most of whom never expected it. And it leaves many loved ones not only crushed by grief but also scrambling to make ends meet.
On the other hand, if you're carrying life insurance and are a single person with no dependents, or are married with a financially independent spouse and no kids or grown kids, then you probably don't need to be paying for life insurance. (Having all the insurance protection you need is another topic that a financial advisor can help you with.)
There are lots of steps you can take to improve your financial condition. Take a few today -- or this week -- before you lose any resolve. You'll thank yourself for it later.