How to make 2020 a financial success – What to Review in the New Year
As we embark on a New Year and a new decade, this is the time we all begin to take stock of where we are, and we think about ways to improve our overall lives and well-being. What can we do this year that we may not have gotten around to last year? How can we be better?
Outside of health and family, most people would say their money and finances are important. Money is a tool that helps to ensure those we love and care about are provided for, and it helps to enhance our quality of life.
Maybe you’ve thought this is the year to get on track. We think so too! Here are some key areas to review in order to help you see the big picture and make 2020 a financial success.
- Review Any Changes to Your Budget Going into The New Year
Did you receive a raise? Have any of your expenses (taxes, insurance, subscription fees, etc.) increased since last year? Did you pay off any debts, or are you on track to pay off any debts this year?
If so, it might be time to re-visit your budget by writing down your anticipated monthly net income and your typical monthly expense items (i.e., housing, transportation, kids, pets, food, personal care, insurance payments, debt payments). This does not mean you actually have to start following a budget, but just doing this exercise can show you a lot of things like how much wiggle room you have each month for unexpected expenses, how much you can expect to see your savings increase by each month, and how much is available to dedicate toward other goals.
- Review Your Savings Goals
Do you have enough in savings in the event of an emergency (i.e., loss of job, car breaks down, new roof, new furnace)? The typical recommendation for how much to keep in savings ranges from 3 to 6-months’ worth of expenses. There is no one size fits all. The right amount for you will depend on many factors like how many income earners are in the household, stability of jobs, etc.
Is it time to increase your retirement account contributions? If you aren’t currently reaching the maximum annual contribution to your retirement plan at work, then it is never a bad idea to increase contributions. For 2020, you can contribute $19,500 (plus an additional $6,500 if you are over age 50) to a 401(k) or 403(b) plan. A good habit to get into is increasing contributions by 1% each year, plus additional if you received a raise or paid off any debts recently.
Review any other investment accounts like college savings accounts (529 plans), and health savings accounts for annual limits and tax benefits to determine if you can and should increase savings in any of these areas as well.
- Review Your Debt Repayment Plan
If you are on track to meet your savings goals and there is still some extra money left over each month, then it may be time to review your debt repayment plan and start putting a little more toward any outstanding debts. If you have high-interest debt like credit cards, then that debt should be prioritized higher.
- Review How You Have Your Money Invested
Have your investment goals or risk tolerance for investing changed? It is always a good idea to review how the money in your different accounts is invested and to confirm that those investment portfolios still align with your goals and comfort level for investing.
- Review Your Situation Considering Any Life Changes that Recently Happened or Will Be Happening in The New Year
Did you have any major life changes happen in the last year that would trigger the need to review your financial plan? (i.e., retiring, getting married, having kids, deaths, divorce).
If so, it is likely time to review your insurance coverage and your estate plan. Things to consider include if your life insurance needs have changed, if you need to update your will or other estate planning documents, and if you need to update the beneficiaries you have listed on any investment accounts or insurance policies.
Not sure how to implement these recommendations? Financial planning can help you balance and build a plan around each of these areas above.
There is no one-size-fits-all when it comes to what you should be doing with your money. We all want to know we’re doing what we should be doing. A good financial planner can help you understand where you are today, how to get to where you want to go, and how to see the big picture – helping you make 2020 a financial success.
Amy Michaels is a Partner and Financial Planner at S.E.E.D Planning Group. She holds the CFP® (CERTIFIED FINANCIAL PLANNER™) designation and oversees all of S.E.E.D.’s Financial Planning Programs. She created the Sprout program in order to help young people have better conversations about money and finances.
S.E.E.D. Planning Group LLC (S.E.E.D.)is a Registered Investment Advisor (RIA) with the SEC. S.E.E.D.’s team provides investment fiduciary and financial planning services to clients. Our fees are disclosed, easy to understand, and not predicated on product sales.