Jan. 22--Stocks have already hit record highs in 2020 and the nation's strong economy presents a variety of investment opportunities for middle-class Americans looking to grow wealth, pay off debt, or invest for the future, according to Massachusetts financial planners. They recommend the following tips for maintaining your financial health this year.
Create and maintain an emergency fund: Jenn Sirois, vice president and financial consultant at Fidelity's Investor Center in Shrewsbury, said savings of three to six months worth of expenses should provide a comfortable cushion for when unforeseen expenses such as medical bills, repairs, or loss of employment pop up.
"The best way to start your emergency fund is find a place that's going to provide you a liquid, easily-accessible savings account," said Sirois, adding that the account should be set up as a direct deposit from your payroll. Out of sight, out of mind. If I don't see it land in my checking account first, I forget I have it."
Putting off expensive luxuries such as dining out or shopping are crucial in saving extra money for the emergency fund, said Sirois.
Pay off high-interest credit card debt: When looking to chip away at credit card debt, Sirois said, "Focus your attention on that high-interest payment first."
After that is paid off, work on the second-highest interest rate using the money you previously put toward the first loan. "It's accelerating the pay-down," said Sirois.
Peggy McGillin, certified financial planner with Journey Wealth Partners in Concord, called this the "snowball chart," which could also apply to other debts such as student or car loans.
"When the first one is paid off then you just roll down and put it toward the second-highest one. That can shorten the amount of time you're whittling down that debt," said McGillin.
Contribute to your workplace retirement plan: About 15% of your income should go toward a workplace retirement plan such as a 401(k), 403(b) or a Roth IRA. For example, if your employer will match 5% of your contribution, you should put in 10%.
McGillin said opening up a personal IRA in addition to a workplace plan can also be a smart move to get a jump start on retirement planning.
Switch your savings account over to an online bank: Andrew Kirwin, vice president of Concord Wealth Management, said to ditch the overhead costs of brick-and-mortar banks and switch your savings account over to an online bank.
"Instead of keeping cash with banks where there's no real benefit, I recommend looking at online banking with brokerage accounts," said Kirwin. Kirwin said online banks offer better interest rates and there are a variety of options to choose from.
Set up an estate plan and get enough life insurance: No matter your age, the unexpected can occur, leaving loved ones in the lurch if you die or get sick.
Georgia Bruggeman, certified financial planner with Meridian Financial Advisors in Holliston, said setting up a plan that lays out a health care proxy, guardians for your children and allocation of assets and property is crucial.
Bruggeman said term life insurance with enough coverage to pay off a mortgage, college fund and income for a surviving spouse will also put family at ease in the event of death.
Donate appreciated stocks to charity: Hendrix Berry, adviser and impact investment analyst with Balanced Rock Investment Advisors in Roslindale, said stocks or mutual fund shares with capital gains in a taxable brokerage account can be donated to charity instead of cash. Doing this can help to avoid paying capital gains and stocks can be donated to many nonprofits directly.
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