Investor Education | 10 top money ideas for 2016

What is the financial outlook for the New Year? No one knows for sure, especially with the national election looming in November, but here are the 10 top money management moves you might decide to make in 2016.

1. Diversification: If volatility in the stock market has taught us anything, it is the need to diversify. Diversification means spreading out your investments over different asset classes as well as investing within those classes. Conversely, if your investment focus is extremely narrow, the risk of disaster is greater.
2. Asset allocation: This investment principle often works hand-in-hand with diversification. By assigning various percentages to the assets in your portfolio, you increase the likelihood of meeting your main objectives and addressing risk aversion.
3. Rebalancing portfolio: Even the best investment design can skew over time. This is a moving target that you must keep an eye on. For instance, if you have adopted an asset allocation plan, now is a good time to review it and make the necessary adjustments.
4. Tax efficiency: As you become more proficient at investment, you should place a greater emphasis on being taxefficient. Factor the tax ramifications into your investments.
   
   Remember that it is what you keep after taxes, not how much you earn, that really matters.
5. Budgeting: Spending more than you make is a common problem. It helps to draw up a monthly budget that takes all your expenses into account. Give yourself a little leeway— everyone is entitled to splurge occasionally—but stick close to the guidelines throughout the entire year.
6. Debt reduction: Although some forms of debt may be perfectly acceptable, such as the mortgage on a house, you should do your best to reduce your other debt load, especially if you are paying interest at relatively high rates. In some cases, debt consolidation may be advisable.
7. Emergency funds: The old axiom about saving for a rainy day is true. Squeeze some extra savings into the monthly budget even if you do not think it is critical. A sudden job loss or unexpected health issue can change things in a hurry.
8. Retirement plan contributions: If you are already contributing to an employer plan such as a 401(k), keep plugging away. In fact, where you can afford to, you might increase contributions for 2016. The money in your account continues to grow on a tax-deferred basis until it is withdrawn—usually not until you retire.
9. Traditional and Roth IRAs: Qualified plan contributions may be supplemented by traditional and Roth IRAs. Because Roths offer future tax advantages, you may choose to convert IRA funds into a Roth this year and pay the resulting tax. (If you converted in 2015 and you want to undo it, see Redemption for a Roth Conversion later in this newsletter.)
10. Estate planning: Finally, look forward into the future. Fine-tune your estate plan by addressing the changing needs of your family. When possible, maximize the benefits for your heirs with a minimum of tax erosion. Rely on your professional advisers for assistance.

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