Authors Posts by Michael Christodoulou

Michael Christodoulou

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Here is something to think about: You could spend two, or even three, decades in retirement. To meet your income needs for all those years, you’ll generally need a sizable amount of retirement assets. How will Social Security fit into the picture?

For most people, Social Security won’t be enough to cover the cost of living in retirement. Nonetheless, Social Security benefits are still valuable, so you’ll want to do whatever you can to maximize them.

Your first move is to determine when you should start taking Social Security. You can begin collecting benefits when you reach 62 – but should you? If you were to turn 62 this year, your payments would only be about 71% of what you’d get if you waited until your full retirement age, which is 66 years and 10 months. (“Full retirement age” varies, depending on when you were born, but for most people today, it will be between 66 and 67.) Every month you wait between now and your full retirement age, your benefits will increase. If you still want to delay taking benefits beyond your full retirement age, your payments will increase by 8% each year, until you’re 70, when they “max out.”  Regardless of when you file, you’ll also receive an annual cost-of-living adjustment.    

So, when should you start claiming your benefits? There’s no one “right” answer for everyone. If you turn 62 and you need the money, your choice might be made for you. But if you have sufficient income from other sources, you’re in good health and you have longevity in your family, or you’re still working, it might be worthwhile to wait until your full retirement age, or perhaps even longer, to start collecting.

Another key consideration is spousal benefits. If your own full retirement benefit is less than 50% of your spouse’s full retirement benefit, you would generally be eligible to claim spousal benefits, provided you’re at least 62 and your spouse has filed for Social Security benefits.

Survivor benefits are another important consideration. When you pass away, your spouse would be able to receive up to 100% of your benefit or his/her own retirement benefit, whichever is higher. Thus, delaying Social Security could not only increase your own benefit, but also the benefit for your surviving spouse.

An additional issue to think about, when planning for how Social Security fits into your retirement, is your earned income. If you’re younger than full retirement age, your benefit will be reduced by $1 for each $2 you earn above a certain amount, which, in 2021, is $18,960. During the year you reach full retirement age, your benefit will be reduced by $1 for each $3 you earn above a set amount ($50,520 in 2021). But once you hit the month at which you attain full retirement age, and from that point on, you can keep all of your benefits, no matter how much you earn (although your benefits could still be taxed).

One final point to keep in mind: The more you accumulate in your other retirement accounts, such as your IRA and 401(k) or similar employer-sponsored plan, the more flexibility you’ll have in managing your Social Security benefits. So, throughout your working years, try to contribute as much as you can afford to these plans.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Independence Day is almost here. And as we make progress in moving past the COVID-19 pandemic, more of us will be able to enjoy Fourth of July activities. However you observe the holiday, it’s important to recognize all the liberties we enjoy in this country. But you may still need to work at one particular type of freedom – and that’s financial freedom. How can you achieve it?

There’s no one instant solution. But you can work toward financial independence by addressing these areas:

  • Retirement savings – Approximately 45% of Americans think the ideal retirement involves “enjoying my well-earned freedom,” according to the March 2021 Edward Jones/Age Wave Four Pillars of the New Retirement study. But when you’re retired, the risk to this freedom is obvious – the paychecks have stopped but the bills haven’t. Furthermore, you could spend two or three decades in retirement. That’s why it’s so important to contribute as much as you can afford to your tax-advantaged retirement accounts, such as your IRA and your 401(k) or another employer-sponsored plan. At a minimum, put in enough to earn your employer’s matching contribution, if one is offered. Whenever your salary goes up, try to increase the annual amount you put in your 401(k) or similar plan. And if appropriate, make sure you have a reasonable percentage of growth-oriented investments within your 401(k) and IRA. Most people don’t “max out” on their IRA and 401(k) each year, but, if you can consistently afford to do so, and you still have money you could invest, you may want to explore other retirement savings vehicles.
  • Illness or injury – If you were to become seriously ill or sustain a significant injury and you couldn’t work for an extended period, the loss of income could jeopardize your ability to achieve financial independence. Your employer may offer disability insurance as an employee benefit, but this coverage is typically quite limited, both in duration and in the amount of income being replaced. Consequently, you may want to consider purchasing private disability insurance. Keep in mind that this coverage, also, will have an end date and it probably won’t replace all the income lost while you’re out of work, but it will likely be more expansive and generous than the plan provided by your employer.
  • Long-term care – Individuals turning 65 have about a 70% chance of eventually needing some type of long-term care, such as a nursing home stay or the assistance of a home health aide, according to the U.S. Department of Health and Human Services. And these services are quite expensive – the average annual cost for a private room in a nursing home is more than $100,000, according to Genworth, an insurance company. Medicare typically covers only a small part of these expenses, so, to avoid depleting your savings and investments (and possibly subjecting your grown children to a financial burden), you may want to consider long-term care insurance or life insurance with a long-term care component. A financial advisor can help you choose a plan that’s appropriate for your needs.

By addressing these areas, you can go a long way toward attaining your financial independence. It will be a long-term pursuit, but the end goal is worth it.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

 

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Now that we’ve gained at least some space from the COVID-19 pandemic, summer travel is heating up. But while you might be eager to hit the road, you won’t want your investments to take a vacation — you need them to work hard for you consistently. But how can you make this happen? 

Here are some ideas:

Know your destination.“If you don’t know where you want to go, then it doesn’t matter which path you take.” This bit of wisdom, paraphrased from the classic children’s book, Alice’s Adventures in Wonderland, may be appropriate for, say, hikers exploring a new landscape. But as an investor, it matters a great deal which path you take. If you only dabble in investing, occasionally putting some money into one investment or another, it will be difficult to build a portfolio that’s consistently working in your best interest. It’s important to create a long-term investment strategy based on where you want to go in life — that is, how long you plan to work, what sort of retirement lifestyle you envision, and so on.

Match goals with investments. Some investments are designed to achieve certain goals. To illustrate: When you contribute to an IRA and a 401(k) or similar employer-sponsored plan, you’re investing for one specific, long-term goal: a comfortable retirement. While you can tap into these accounts for other purposes — though doing so might incur immediate taxes and penalties — they are designed to provide you with income during your retirement years. Similarly, you may have other investments for other purposes, such as a 529 education savings plan. Here’s the key point: Goals-based investing, by its nature, can help ensure your portfolio is always working on your behalf, in the way you intended.

Invest for growth. Ideally, hard work produces results, and one of the main results you want from your investments is growth — that is, you want your investments to appreciate in value so they can eventually help you meet your goals. But if you are overconcentrated in vehicles such as certificates of deposit (CDs) and government securities, you may end up lowering your growth potential. That’s not to say that CDs and Treasury bills are in some sense “lazy.” They can provide you with income and help you reduce the impact of market volatility on your portfolio. But to achieve most of your goals, you’ll need a reasonable number of growth-oriented investments working for you, with the exact percentage based on your needs and life stages.

Check your progress. How else can you ensure your investments aren’t just taking it easy? By checking up on them. If you follow a buy-and-hold strategy, your portfolio shouldn’t require many changes if it already reflects your goals, risk tolerance and time horizon. Too much buying and selling could jeopardize your ability to follow a consistent, long-term strategy. However, “buy and hold” doesn’t mean “buy and forget.” By reviewing your portfolio at least once a year, you can determine if your investments are performing as they should. If they’re not working for you as you’d like, you may need to make some changes.

If you’re traveling this summer, relax and enjoy yourself — but keep those investments working hard.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

On April 22, we observe Earth Day, an occasion that has inspired millions of people over the decades to take steps to clean up our world. Of course, your physical surroundings are important, but you also operate in other “ecosystems” – social, cultural and political. And you’ll need to consider your investment environment, too. How can you improve it?

Here are a few suggestions:

  • Avoid “toxic” investment strategies. The dangers of pollution helped drive the creation of Earth Day. As an investor, you also need to watch out for “toxins” – particularly in the form of unhealthy investment techniques. For example, chasing after “hot” stocks can burn you. In the first place, by the time you’ve heard of them, they may already be cooling off. Second, and probably more important, these hot stocks just may be wrong for the investment mix that’s appropriate for your needs. Another toxic investment strategy: trying to “time” the market by “buying low and selling high.” No one can really predict when market highs and lows will occur, and if you’re always jumping in and out of the investment world, you’ll likely waste time and effort – not to mention money. Instead of looking for today’s hottest stocks or guessing where the market is heading, try to create and follow a long-term investment strategy based on your goals, risk tolerance and time horizon.
  • Reduce waste.From an environmental standpoint, the less waste and garbage we produce, the better it is for our planet. As an investor, can you find “wasteful” elements in your portfolio? It’s possible that you own some investments that may be redundant – that is, they are virtually indistinguishable from others you may have. Also, some investments, due to their risk profile or performance, no longer may be suitable for your needs. In either case – redundancy or unsuitability – you might be better off selling the investments and using the proceeds to purchase others that can be more helpful.
  • Recycle wisely.Recycling is a major part of the environmental movement. At first, though, you might not think the concept of recycling could apply to investing. But consider this: If you own stocks or mutual funds, you may receive dividends, and, like many people, you may choose to automatically reinvest those dividends back into the stocks or funds. So, in a sense, you are indeed “recycling” your dividend payments to boost your ownership stakes – without expending additional resources. And, in fact, this can be quite an effective and efficient way to increase your wealth over time.
  • Plant some “trees.”Planting trees has always been a key activity among boosters of the environment – with the recognition that their efforts will take years, or even decades, to reach fruition. When you invest, you must sometimes start small. By purchasing a limited amount of an investment and nurturing it over the years by adding more shares, you may one day have achieved significant growth. (Keep in mind, though, that there are no guarantees – variable investments such as stocks can lose principal.)

By making these and other moves, you can create a healthy investment environment – one that can help you achieve your long-term goals.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

As you’ve probably heard, the government extended the federal income tax filing deadline for individual taxpayers from April 15 to May 17, due to the COVID-19 pandemic. But the extra month doesn’t just give you additional time to prepare your taxes – it also provides you with an extra chance to contribute to some tax-advantaged investments for the 2020 tax year.

First of all, you’ve got more time to fully fund your IRA – in fact, if you don’t already have one, you’ve got until the new tax deadline to open one for the 2020 tax year and then continue funding it for 2021 and beyond. For 2020 and 2021, the IRA contribution limit is $6,000, or $7,000 if you’re 50 or older.

If you have a traditional IRA, your investment dollars are typically tax deductible. So, for example, if you are in the 24% tax bracket, and you put in the full $6,000, your contribution for the 2020 tax year would only “cost” you $4,560, because you’d be able to deduct $1,440 from your taxable income. (Deductibility is gradually phased out at certain income levels.)

And your earnings grow tax-deferred until you start taking withdrawals, typically during retirement. With a Roth IRA, your contributions aren’t deductible, but earnings can grow tax free if you’ve had your account at least five years and don’t take withdrawals until you’re 59½ or older. Eligibility for a Roth IRA also phases out at higher income levels.

What if you own a small business or, like many people this past year, struck out on your own and became self-employed? Business owners who file as sole proprietors also have until May 17 to contribute to, or open, a SEP IRA. (You might qualify for an extension until Oct. 15.) An SEP IRA is similar to a traditional IRA in that contributions are tax deductible and earnings grow tax deferred. For the 2020 tax year, you can contribute the lesser of 25% of your compensation or $57,000. However, special rules govern the maximum deductible contributions, so consult with your tax advisor before finalizing the amount you put in. Also, keep in mind that your estimated taxes for the first quarter of 2021 will still be due on the original April 15 date.

There’s one more area in which the new tax-filing deadline offers you an opportunity: “recontributions” to your retirement plans, such as your IRA and 401(k). In 2020, withdrawal rules were loosened for these accounts for individuals financially affected by the pandemic, and if you took money out, you could spread the taxes over three years. However, during that time, you can recontribute all or part of the withdrawals. And any money you do recontribute before the tax filing deadline of May 17 (or later, if you get an extension) can be excluded on your 2020 tax return, possibly reducing your taxes. So, your recontribution can provide you with more money in your retirement accounts and a tax break today.

One final point: If you’ve already filed your taxes but would still like to claim the extra tax benefits provided by IRA contributions or retirement plan recontributions, you may be able to file an amended return, so check with your tax advisor. In any case, look for ways to benefit from the tax-advantaged opportunities available to you.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

The COVID-19 pandemic may end up changing our lives in some significant ways. To cite one example, it’s likely we’ll see a lot more people continue to work remotely, now that they’ve seen the effectiveness of tools such as videoconferencing. Education, too, may be forever changed in some ways. Perhaps just as important, though, is how many people may now think more about the future – including how they invest.

If you work with a financial professional, you may have connected with this individual over the past several months through a videoconferencing platform, rather than in person. Some people like this arrangement because it offers more scheduling flexibility and eliminates the time and effort of traveling to and from an appointment. Others, however, still prefer face-to-face contact and look forward to when such arrangements will again be practical and safe for everyone involved. But if you’re in the first group – that is, you prefer videoconferencing – you may now wish to use this communication method in the future, at least some of the time.

But beyond the physical aspects of your investing experience, you may now be looking at some changes in your investment strategy brought on, or at least suggested, by your reactions to the pandemic.

For example, many people – especially, but not exclusively, those whose employment was affected by the pandemic – found that they were coming up short in the area of liquidity. They didn’t have enough easily accessible savings to provide them with the cash they needed to meet their expenses until their employment situations stabilized. Consequently, some individuals were forced to dip into their long-term investments, such as their 401(k)s and IRAs. Generally speaking, this type of move is not ideal – these accounts are designed for retirement, so, the more you tap into them early, the less you’ll have available when you do retire. Furthermore, your withdrawals will likely be taxable, and, depending on your age, may also be subject to penalties.

If you were affected by this liquidity crunch, you can take steps now to avoid its recurrence. Your best move may be to build an emergency fund containing three to six months’ worth of living expenses, with the funds held in a separate, highly accessible account of cash or cash equivalents. Of course, given your regular expenses, it may take some time to build such an amount, but if you can commit yourself to putting away a certain amount of money each month, you will make progress. Even having a few hundred dollars in an emergency fund can help create more financial stability.

Apart from this new appreciation for short-term liquidity, though, the foundation for your overall financial future should remain essentially the same. In addition to building your emergency fund, you should still contribute what you can afford to your IRA, 401(k) and other retirement plans. If you have children you want to send to college, you might still explore college-funding vehicles such as a 529 plan. Higher education will still be expensive, even with an expansion in online learning programs.

Post-pandemic life may contain some differences, along with many similarities to life before. But it will always be a smart move to create a long-term financial strategy tailored to your individual needs, goals and risk tolerance.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Sadly, identity theft happens throughout the year – but some identity thieves are particularly active during tax-filing season. How can you protect yourself?

One of the most important moves you can make is to be suspicious of requests by people or entities claiming to be from the Internal Revenue Service. You may receive phone calls, texts and emails, but these types of communication are often just “phishing” scams with one goal in mind: to capture your personal information. These phishers can be quite clever, sending emails that appear to contain the IRS logo or making calls that may even seem to be coming from the IRS.

Don’t open any links or attachments to the emails and don’t answer the calls – and don’t be alarmed if the caller leaves a vaguely threatening voicemail, either asking for personal information, such as your Social Security number, or informing you of some debts you supposedly owe to the IRS that must be taken care of “immediately.”

In reality, the IRS will not initiate contact with you by phone, email, text message or social media to request personal or financial information, or to inquire about issues pertaining to your tax returns. Instead, the agency will first send you a letter. And if you’re unsure of the legitimacy of such a letter, contact the IRS directly at 800-829-1040.

Of course, not all scam artists are fake IRS representatives – some will pass themselves off as tax preparers. Fortunately, most tax preparers are honest, but it’s not too hard to find the dishonest ones who might ask you to sign a blank return, promise you a big refund before looking at your records or try to charge a fee based on the percentage of your return. Legitimate tax preparers will make no grand promises and will explain their fees upfront. Before hiring someone to do your taxes, find out their qualifications. The IRS provides some valuable tips for choosing a reputable tax preparer, but you can also ask your friends and relatives for referrals.

Another tax scam to watch out for is the fraudulent tax return – that is, someone filing a return in your name. To do so, a scammer would need your name, birthdate and Social Security number. If you’re already providing two of these pieces of information – your name and birthdate on social media, and you also include your birthplace – you could be making it easier for scam artists to somehow get the third. It’s a good idea to check your privacy settings and limit what you’re sharing publicly. You might also want to use a nickname and omit your last name, birthday and birthplace.

To learn more about tax scams, visit the IRS website (irs.gov) and search for the “Taxpayer Guide to Identity Theft.” This document describes some signs of identity theft and provides tips for what to do if you are victimized.

It’s unfortunate that identity theft exists, but by taking the proper precautions, you can help insulate yourself from this threat, even when tax season is over.

Michael Christodoulou, ChFC®, AAMS®CRPC®, CRPS®

Financial Advisor from the STONY BROOK EDWARD JONES

Edward Jones. Member SIPC.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

We’re now well into what’s known as “Tax Season.” If your income in 2020 was affected by the COVID-19 pandemic, your tax return will reflect it. However, if your earnings were fairly normal last year, you might look at your tax situation and wonder how you could improve it in 2022. One area to look at may be your investment-related taxes.

To help control these taxes, consider these moves:

  • Take full advantage of tax-deferred investments. As an investor, one of the best moves you can make is to consider contributing as much as you can afford to your tax-deferred accounts – your traditional IRA and 401(k) or similar employer-sponsored plan – every year. If you
  • Look for tax-free opportunities. Interest from municipal bonds typically is exempt from federal income tax, and, in some cases, from state and local income tax, too. (Some municipal bonds, however, may be subject to the alternative minimum tax.) And if you qualify to contribute to a Roth IRA – eligibility is generally based on income – your earnings can be withdrawn tax-free, provided you’ve had your account for at least five years, and you don’t start taking withdrawals until you’re at least 59-1/2. Your employer may also offer a Roth 401(k), which can provide tax-free withdrawals. Keep in mind, though, that you contribute after-tax dollars to a Roth IRA and 401(k), unlike a traditional IRA and 401(k), in which your contributions are made with pre-tax dollars.
  • Be a “buy and hold” investor. Your 401(k) and IRA are designed to be long-term investments, and you may face disincentives in the form of taxes and penalties if you tap into them before you reach 59 ½.  So, just by investing in these retirement accounts, you are essentially pursuing a “buy and hold” strategy. But you can follow this same strategy for investments held outside your IRA and 401(k). You can own some investments – stocks in particular – for decades without paying taxes on gains. And when you do sell them, you’ll only be taxed at the long-term capital gains rate, which may well be less than your ordinary income tax rate. But if you’re frequently buying and selling investments you’ve held for one year or less, you could rack up some pretty big tax bills, because you’ll likely be taxed at your ordinary income tax rate.
  • Be prepared for unexpected taxes. Mutual fund managers are generally free to make whatever trades they choose. And when they do sell some investments, they can incur capital gains, which may be passed along to you. If this is a concern, you might look for funds that do less trading and bill themselves as tax efficient.

While taxes are one factor to consider when you invest, they should probably not be the driving force. You need to build a diversified portfolio that’s appropriate for your risk tolerance and time horizon. Not all the investments you select, and the moves you make with them, will necessarily be the most tax efficient, but by working with your financial and tax professionals, you can make choices that can help you move toward your long-term goals.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

During the COVID-19 pandemic, many of us have been forced to work from home. But once we’ve moved past the virus, many workers may continue working from home. More than one-third of companies with employees who started working from home now think that remote work will stay more common post-pandemic, according to a Harvard Business School study. This shift to at-home work can affect people’s lives in many ways – and it may end up providing workers with some long-term financial advantages.

If you’re one of those who will continue working remotely, either full time or at least a few days a week, how might you benefit? Here are a few possibilities:

  • Reduced transportation costs – Over time, you can spend a lot of money commuting to and from work. The average commuter spends $2,000 to $5,000 per year on transportation costs, including gas, car maintenance, public transportation and other expenses, depending on where they live, according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. If you are going to work primarily from home, you should be able to greatly reduce these costs.
  • Potentially lower car insurance premiums – Your auto insurance premiums are partially based on how many miles you drive each year. So, if you were to significantly reduce these miles by working from home, you might qualify for lower rates.
  • Lower expenditures on lunches – If you typically eat lunch in restaurants or get takeout while at work, you could easily be spending $50 or more per week – even more if you regularly get coffee drinks to go. By these figures, you could end up spending around $3,000 a year. Think how much you could reduce this bill by eating lunch at home during your remote workday.
  • Lower clothing costs – Despite the rise in “casual dress” days, plenty of workers still need to maintain appropriate office attire. By working from home, you can “dress down,” reducing your clothing costs and dry-cleaning bills.

As you can see, it may be possible for you to save quite a bit of money by working from home. How can you use your savings to help meet your long-term financial goals, such as achieving a comfortable retirement?

For one thing, you could boost your investments. Let’s suppose that you can save $2,500 each year by working remotely. If you were to invest this amount in a tax-deferred account, such as an IRA or your 401(k) or similar employer-sponsored plan and earned a hypothetical 6% annual return for 20 years, you’d accumulate more than $97,000 – and if you kept going for an additional 10 years, you’d have nearly $210,000. You’d eventually pay taxes on the amount you withdrew from these accounts (and withdrawals prior to age 59½ may be subject to a 10% IRS penalty), but you’d still end up pretty far ahead of where you’d be otherwise.)

You also might use part of your savings generated by remote work to help build an emergency fund containing a few months’ worth of living expenses. Without this fund, you might be forced to dip into your retirement accounts to pay for something like a major home repair.

Becoming an at-home worker will no doubt require some adjustments on your part – but, in strictly financial terms, it could lead to some positive results.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.

Edward Jones, Member SIPC

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By Michael Christodoulou

Michael Christodoulou
Michael Christodoulou

Many of us probably felt that 2020 lasted a very long time. But now that 2021 is upon us, we can make a fresh start – and one way to do that is to make some New Year’s resolutions. Of course, you can make these resolutions for all parts of your life – physical, emotional, intellectual – but have you ever considered some financial resolutions?

Here are a few such resolutions to consider:

  • Don’t overreact to events. When the coronavirus pandemic hit in mid-February, the financial markets took a big hit. Many people, convinced that we were in for a prolonged slump, decided to take a “time out” and headed to the investment sidelines. But it didn’t take long for the markets to rally, rewarding those patient investors who stayed the course. Nothing is a certainty in the investment world, but the events of 2020 followed a familiar historical pattern: major crisis followed by market drop followed by strong recovery. The lesson for investors? Don’t overreact to today’s news – because tomorrow may look quite different.
  • Be prepared. At the beginning of 2020, nobody was anticipating a worldwide pandemic and its terrible consequences, both to individuals’ health and to their economic well-being. None of us can foretell the future, either, but we can be prepared, and one way to do so is by building an emergency fund. Ideally, such a fund should be kept in liquid, low-risk vehicles and contain at least six months’ worth of living expenses.
  • Focus on moves you can control. In response to pandemic-related economic pressures, some employers cut their matching contributions to 401(k) plans in 2020. Will some future event cause another such reduction? No one knows – and even if it happens, there’s probably nothing you can do about it. Instead of worrying about things you can’t control, focus on those you can. When it comes to your 401(k) or similar employer-sponsored retirement plan, put in as much as you can afford this year, and if your salary goes up, increase your contribution.
  • Recognize your ability to build savings. During the pandemic, the personal savings rate shot up, hitting a record of 33% in April, according to the U.S. Bureau of Economy Analysis. It fell over the next several months, but still remained about twice as high as the rate of the past few years. Of course, much of this surge in Americans’ proclivity to save money was due to our lack of options for spending it, as the coronavirus caused either complete or partial shutdowns in physical retail establishments, as well as dining and entertainment venues. But if you did manage to boost your own personal savings when your spending was constrained, is it possible to remain a good saver when restrictions are lifted? Probably. And the greater your savings, the greater your financial freedoms – including the freedom to invest and freedom from excessive debt. When we reach a post-pandemic world, see if you can continue saving more than you did in previous years – and use your savings wisely.

These aren’t the only financial resolutions you can make – but following them may help you develop habits that could benefit you in 2021 and beyond.

This article was written by Edward Jones for use by Michael Christodoulou, ChFC®,AAMS®,CRPC®,CRPS® of the Stony Brook Edward Jones.