Make this a year filled with smart investments by taking a serious look at your finances
Make this a year filled with smart investments by taking a serious look at your finances and thinking about your goals. The best way to make 2013 a prosperous year is by considering these questions and factors before you invest your money:
- What are my life goals?
Money can be the means to an end, but it makes a lousy metric for measuring what you are really getting out of life. Working towards something feels different than when money itself is the end goal. When you can identify what you are working toward, you will take investing for those goals more seriously.
- Where does my money go?
You have two choices when it comes to money: save it for later or spend it now. Do both by creating a spending and saving plan for your income, and stick to it. Keep track of your spending by using a piece of paper that you carry in your wallet or an app on your smartphone. No matter how you do it, it is important to make sure your spending plan matches your reality .
- Expand your portfolio.
Resolve to expand your portfolio's asset classes this year. Dig a little deeper beyond the normal division of cash, stocks and bonds. Think about adding an international component, look at emerging market economies and get professional help to expand if you need it.
- Rebalance your portfolio.
Investment allocations are most often split between cash, stocks and bonds, and the right allocation for you will depend on your market outlook, risk tolerance and investing goals. Rebalance your portfolio each year to stay on track with your target allocation but consult with a tax adviser and financial planning professional before making any changes.
- Have splurge money for risky investments.
If you get a thrill out of investing in the next big thing, set aside a maximum of 10 percent of your portfolio for those risky choices. You will get the excitement of taking a chance without doing too much harm should the stock not live up to its hype.
- Watch your fund expenses.
Look for mutual funds  with expenses below 0.89 percent for bond funds and 1.33 percent for stock funds. Keeping investment costs low is the greatest way to increase your odds of earning a high return.