Let’s face it, the last few weeks have been a strain on our pocketbooks! With the holidays, we have all had time to indulge in a few whims and luxuries as we have spent time with friends and family. Toys, dinners, and holiday extras may have been in the budget, but many of us tend to let our budgets fall to the wayside in exchange for the euphoria of the “holiday spirit”
With the New Year approaching, it’s a perfect time to set your New Year’s Resolutions! Be it a traditional resolution, or something unique to you, I challenge you to challenge yourself!
Looking at the list of top 10 most broken resolutions…. They don’t seem so bad. Yet there is a reason that most resolutions are broken. This is usually a result of making unrealistic goals that may be fairly impossible to achieve. When setting your goals and resolutions this year be “SMART” about it! Specific, Measurable, Achievable, Realistic and Timely. In other words… Don’t plan to lose 10 lbs in a few days, or save $50 thousand in a year, if it’s unrealistic for you.
Here are a few ways you can kick-start your financial planning in 2020.
1. Organize your Finances to make your goals easier to track.
Before you start any project it’s best to get organized! Your finances are no different. Do you know where your money goes? Or what happened to that 401k you had from the company you left 10 years ago?
There are many ways to get organized, so you can pick a method that works best for you. Two methods I see a lot are an old fashioned binder that contains all of the documents related to your finances, and online organizers for people that are more tech savvy. Keep on top of the information, and update information as it changes.
2. Review Your Annual Financial Goals
Your financial situation may or may not be different from what it was at the beginning of 2019. If there wasn’t much of a change, let’s examine why and where your goals may have fallen short. If there were positive changes, let’s keep with the momentum and set new goals to continue to build your finances. Regardless, it’s in the best interest for your money to periodically review your financial goals and change them if necessary. Financial planning is a dynamic process. If your financial plan does not align with your changing financial needs then all your time, energy, and efforts will be in vain.
3. Prioritize Your Debts
To quote Dave Ramsey, “Debt is the biggest enemy of your financial future”.
If you have ever been in debt you know how AWFUL it feels! Whether you are repaying student loans, or you have credit card debt, you always feel behind. It’s tough to keep your budget balanced and start getting ahead.
Before 2019 ends, develop a plan to tackle your debts in the next year. Do we need to rework your financial plan to accommodate for the extra money you’ll need to clear out your debts? Are you eligible for the Public Service Loan Forgiveness Programs? If so it might make sense to make a plan to lower your income to keep your payments low.
Whether it’s the snowball method or debt avalanche, it’s important to create a smart plan to get the debt repaid. In the long run you will have less stress and a healthier financial outlook.
4. Tax planning often means spend money to save money
My least favorite call to receive each April 15th, is a call from someone asking how to save on last year’s taxes. I believe in the saying “There is no time like the present”, but the day your taxes are due is simply “Too Little, Too late” to start planning for last year. To start the year off (and tax season) right, you need to make sure that you’ve got your taxes in order. We all know how daunting taxes are, and reviewing any changes in your financial standing over the last year seems like one of those tasks that can be put off. It’s always better to hold a quick year-end tax planning meeting with your tax advisor. This gives you a head start in staying ahead of the curve when it comes to planning your taxes for the coming year. To keep it short, it’s always better to be prepared for the inevitable
If you’re a business owner or even a freelancer, sometimes you need to spend a little more to save a little more. One of the greatest ways to achieve growth is to invest in your own business. Plan to spend money on an expensive piece of equipment or to replace old depreciating assets with new ones. Strategize and make smart decisions that you won’t regret later. You could start by looking at the purchases you’re planning to make next year and choose the most important ones that will help your business thrive in the new year.
5. Deepen your understanding of your finances
As your money grows, it’s a good idea to better understand how it works. This helps you and your CERTIFIED FINANCIAL PLANNER™ make better decisions to build a financial plan that caters to your specific needs.
Make it a point to spend more time on your finances in 2020. This doesn’t mean spending every day trying to learn everything about financial planning. A few hours every month to understand your finances better. The easiest way is to schedule a short, regular meeting with your financial planner. This will help you keep a tab on how your money is working for you and how you can gauge the effectiveness of your financial plan.
Until next time... this is Melissa Making Cents!
Melissa Anne Cox
CERTIFIED FINANCIAL PLANNER™
College Funding and Student Loan Advisor