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Financial Fitness: Getting Investments in Shape for 2014

by on January 19, 2014 7:50 AM

The New Year is the time that many people set resolutions for themselves and their families.

The most popular New Year's Resolution is to lose weight (you could have guessed that, right?).

The next most popular is to get more exercise. Diet and exercise are two of the hardest lifestyle changes to make. Yet, people succeed at making major changes in this area. Some of the most famous: Jared Fogle ('Subway guy') and Jillian Michaels, who was overweight as a child and is now a personal trainer.

I propose an easier resolution, which you can start at any time: become financially fit. What makes this easier? There are many financial steps you can take that once established are automatic. Unlike losing weight or eating better, you can put some of your financial health on autopilot.

Like a healthy diet and exercise, there are financial steps we know that we should take but just never quite get around to it. The first step is to know where you are and where you need to improve. It's similar to weighing in when you first decide to lose weight or throwing out the unhealthy snacks in the house so you eat better.

What investment accounts do you have? What loans do you have? Create your own Net Worth statement, showing total assets minus liabilities. What do you most want to improve on? Lower debt-load? Larger emergency savings? I'll hone in on a few key financial pieces that will improve your financial picture over the coming years.

The thumbnail approach to emergency savings is to have three to six months of expenses set aside. If you are a tenured professor, using three months makes sense. If you have a career based on commissions, you may wish to put aside even more than six months of expenses to get through downturns.

If you aren't hitting your number for emergency savings (money in savings accounts, money markets, etc. that are readily accessible in the event of an emergency), start putting money into an account earmarked as an emergency savings every month. The trick is that you can't touch it except for emergencies until you build up enough for your goal.

If you have a mortgage, use an online calculator to determine how much it would take to pay it off early and especially make sure it is paid off before retirement. Once you know the amount you need to pay monthly, set up an automatic payment from your bank account to pay onto the principal of your mortgage every month. This is akin to losing extra weight every month but so much easier.

When is the last time you reviewed your contributions to or your investments in your retirement account? Make an appointment with your advisor or HR person at your company. One of the main things to determine: are you getting the full company match if there is one? Always take advantage of the free, tax-free return of a matching contribution. If you are receiving the full match, can you increase your contribution anyway? Always use a percentage to determine your retirement contribution, so that when you get a raise, the dollar amount going toward your retirement increases also.

If you are maxing out your retirement at work, should you diversify your tax situation? A Roth IRA or the Roth option through work can lend an extra level of diversification tax-wise. Unlike traditional plans, qualified distributions from a Roth are not taxed as income. My suggestion is to look into a Roth option or IRA. Put $50 each month from your bank account into a Roth IRA if you are eligible. Don't plan on writing a check. There is always an excuse for not writing the check. Remember, this is a plan to make your financial fitness automatic. That means having money moved automatically to invest or to pay off debt.

I have been lucky enough to be in financial services for over 20 years. I started my career seeing what actually was "financially fit" and what wasn't. Therefore, I follow my own advice.

One area where I didn't have good habits was in exercise. However, in August 2013, I found an interest in running. Studying up on the best strategies, downloading a 'Couch to 5K' app and buying running shoes came first. Then came the hard part – the actual running.

When I started, I couldn't go very far. Yet, I persevered and it got better. Sometimes I am amazed at how fast or how far I can go compared to where I started. I actually have learned to enjoy it and miss running when I miss a day.

Why do I tell you this? So you know that changes can be made at any time and a girl whose motto was, "I don't run and if you ever see me running, you should run too because something is probably chasing me", now wants to run a 5k. My challenge to you is to move forward and become more financially healthy by tackling one of the automatic (and easy) choices above.

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Judy Loy, ChFCâ, is a Registered Investment Advisor and CEO at Nestlerode & Loy Investment Advisors, State College, Pa. A graduate of Penn State University, Loy has been with the firm since 1992, assisting clients with retirement planning, brokerage services and investment advice. She can be reached at
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