By FPA member Jeanne Gibson Sullivan, CFP®

Last Updated: January 17, 2011

The New Year is a good time to commit to better financial habits. Often small changes now can make a big difference in years to come. Soon documents needed for taxes will start arriving in the mail (or online). Take a few minutes to think about how you can improve your finances in the new year.

• Maintain Your Emergency Fund: Many savings accounts are paying a very low rate of interest. With a little research, you might be able to find a slightly higher rate of return. Take a look at your balances and have a goal in mind for what is an appropriate emergency fund, for example six to nine months of living expenses. If you are short, then take a step to add to your emergency fund every month. Resist the temptation to take on too much risk with your emergency fund simply because interest rates are low.
• Rebalance Your Accounts: Fortunately 2010 and 2009 were good years for equities. You may find that your investment accounts have a higher allocation to stocks than you intended, simply because those investments have done well. Take the time to rebalance and bring your investments back to your target allocation. While you are at it, see if you can increase your contribution to your retirement plan.
• Check Your Insurance: Bad weather has worked its way across the country this winter. Review your homeowners insurance to find out what you are covered for in the event of an emergency. Also, review your life insurance, disability and long-term care to make sure you have the coverage that you need, especially if your circumstances have changed.

FPA member Jeanne Gibson Sullivan, CFP®, is a financial planner in Reading, MA.