Dec 28, 2016 3 min read

Many people make New Year’s resolutions. Usually, they stick with them for about a week. Usually, these resolutions deal with subjects such as stop smoking, improve your health or improve your financial future.

We want to make it easy for you to improve your financial situation. In the 1990s, people worked their career for one company. You received a pension which, when combined with Social Security, provided a secure retirement. The company provided funds for retirement and took all of the investment risk to guarantee retirement benefits. The employees’ responsibility was to work the required number of years.

This situation changed over the past 20 years. Competitive pressures from overseas manufacturers forced companies to cut costs. One cost-cutting measure was to change the retirement system. This happened in all industries, but the auto manufacturers are a classic illustration.

Most import car brands are actually manufactured in the United States. These factories have a big cost advantage because they do not have all of the legacy costs of General Motors or Ford. Legacy costs are things like retirement benefits paid to workers who no longer work for the company. These can be more than $1,000 per vehicle.

Today’s main retirement vehicle, 401(k)s, were never intended to serve this purpose. A 401(k) was part of the tax code that allowed for some salary deferral. Originally, it was used for executive bonuses. This change switched the retirement landscape 180 degrees. Now the employee is responsible for funding most of the retirement account through salary deferral. And there may be some employer match. Investment risk was transferred to the employee also.

This change in retirement planning changed the landscape of asset allocation. Suddenly, most people owned stocks. Before this time, only the wealthy owned this investment. Employees now have to have the financial literacy to make their best decisions. All of this additional money flowing in pushes stock market valuations to new highs. This could make past market analysis obsolete.

There are many other changes that current workers must face that their parents did not. Many more people carry debt than earlier generations. This can make it harder to save for retirement. Health care also is much more expensive. There are also many other discretionary costs, such as cellphones and cable television, that can add up to hundreds of dollars per month.

Today’s workers are also more likely to work for multiple employers over their career. This may involve moving to different cities and buying multiple houses later in life.

Do make a New Year’s resolution to improve your financial life. We will help you by giving you knowledge to make the best decisions for your family. Financial literacy is the building block.

Have a great and safe New Year’s Eve.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, contact business editor Michael Bradwell at mbradwell@observer-reporter.com.