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Break These Financial Habits in 2016

Don't let these five behaviors sabotage your financial health this year.

We're two weeks into the new year and most of us have broken our resolutions, if we bothered to make them at all. Of the 45% of Americans who make resolutions, only about 8% of us achieve them in a given year, according to Statistic Brain.

Instead of resolving to do something new, we might be better off trying to stop doing something that we commonly do. In that spirit, here are five common habits that could be undermining your financial health.

1) Checking in on your portfolio too often
Given the market turbulence we've experienced so far in 2016, even the most patient investors have likely checked their balances once or twice. But as long as your asset mix is the result of a well-thought-out investment plan, stop checking so much.

"It's so platitudinous to tell investors that they should tune it out; but the fact is that, over time, investors do get paid for being willing to ride out these periods of market volatility that inevitably accompany stocks," says Morningstar director of personal finance Christine Benz. "If you are an investor who needs growth in your portfolio, frankly you really have no choice but to be in stocks with at least a portion of your portfolio."

For those investors who can't resist the urge to do something during market upheavals, Benz recommends rebalancing, pulling forward IRA contributions, and doing some prudent buying if opportunities present themselves. And if you don't have an investment plan, develop one!

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2) Calculating RMDs too late in the year
Retirees who don't need their Required Minimum Distributions (RMDs) to cover living expenses may push off taking them, due to that lack of need or because they want to enjoy some extra compounding on those dollars. It's fine to delay taking RMDs, but don't put off calculating them. Knowing what your RMD will be early in the year allows you to do some planning.

"Even if you don't intend to take your RMD until later in the year, it's still valuable to calculate your RMD as soon as possible," says Benz. "That way, you can take steps to offset the tax impact--with tax-loss selling or accelerating deductions by prepaying property taxes, for example. A tax advisor should be able to help you gauge the impact of your RMDs on your tax bill and may be able to suggest steps you can take to reduce it."

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3) Not carefully designating beneficiaries
When setting up any new accounts this year, be sure you name a beneficiary or beneficiaries--and make sure that these jibe with whomever you've named in any wills and/or trusts. "Many investors aren't aware that beneficiary designations for 401(k)s, IRAs, and other accounts supersede the information they've laid out in their wills," reminds Benz. "If you've gone to the trouble of drafting a will or creating trusts, it's essential that your beneficiary designations sync up with what's in those documents."

And while you're at it, make sure your beneficiaries on existing accounts are up to date, especially on those accounts set up years ago, when your life may have been very different from what it is today.

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4) Accumulating too much of your company's stock
It's easy to let company stock pile up, especially if you receive it as part of your compensation or hold it in your 401(k). But don't let loyalty to your company or belief in its prospects stand in the way of commonsense diversification. "Even if an employer doesn't run into Enron-style problems, employees with a lot of company stock have too much of their economic wherewithal riding on their employer's performance: their own jobs, plus their portfolio's performance as well," says Benz.

This year, don't let your stake in your company's stock just ride or grow. Make sure you're holding it in a quantity that doesn't undermine your portfolio's diversification and your overall financial health. For those of you holding on to your former employer's stock: Although you don't have as much of your financial well-being tied into this company as you did when you worked there, consider cutting back on the stock or even cutting it loose entirely. If the stock doesn't fill a role in your portfolio or tips your financial balance too far toward one particular sector, perhaps it's time to let it go.

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5) Collecting investments and accounts
As we saw during's Portfolio Makeover Week, some investors collect investments and/or investment accounts, either on purpose or accidentally. Maybe they have several retirement accounts from previous employers that they never bothered to roll over into an IRA. Or maybe they can't resist dipping a toe in an up-and-comer and now own too many of them. Or maybe they're like portfolio-makeover subjects Grant and Lori, who have accumulated 40 securities across eight different accounts over time. "Multiple accounts are a given for most late-career individuals and couples," admits Benz. But managing all those accounts takes time, and multiple accounts can lead to unintended overlap and undermine your diversification plans.

Stop collecting investments and accounts this year. Instead, consider streamlining what you have in order to simplify maintenance over the long term.

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