It’s the perfect time of year to start to plan for your financial wellness. With 2019 in the rearview mirror, we’ve got a whole 12 months of data on how we spent, saved, and earned. That means you can start your financial planning really informed about what worked (and what might need some fine tuning) in 2020.
Personally, a laundry list of financial to-dos isn’t going to happen. Instead, I’m making 2020 about four focused resolutions that I think will make the biggest difference in my financial health. And to be sure they become outcomes instead of just ideas, I’m breaking down the exact steps I’ll need to take to get me there.
These action items can work for you too. And if these financial aspirations aren’t exactly what you’re working on, you can still take the same approach. Sketch out your goals and turn each one into action items. Give yourself a date by which you’ll have checked the box, and watch your financial resolutions turn into financial achievements in 2020!
1. Go Beyond the 401K Savings
Almost all of us could be doing more to save for retirement. Once you’re maximizing any employer match for your savings, or have whipped up a plan for your self-employed status, it could be time to look at additional investment options. I’m feeling ready for a new horizon, so in 2020, it’s time for some updated retirement savings and investing goals.
My Action Items
A ton of variables go into whether or not you’re personally at a good spot to take on different types of investing. It’s important to understand exactly your own risk tolerance and financial goals. I’ll be starting this process by comparing and researching some robo-advisors, or “robos.” Robos can be a good way to get into other investment options, and many like Betterment, Ellevest, and Wealthfront make it easy by teeing up questions that help you understand your needs. Remember, investment accounts are not savings — their value fluctuates and you can have losses up to and including your original investment, so be sure you are crystal clear on the product you’re selecting.
Review My Savings Allocation
I hit a personal savings goal earlier this year, and this money is stashed away in a risk-free savings account. That means I’m ready to now shift that automatic savings deposit into whatever new investment account I decide on. The share of that savings might change a little bit depending on other things next year I need to save for (travel, etc.) but by month-end, I want to have that change updated in my corporate payroll system.
2. Right Size My Emergency Fund
New research from economists Emily Gallagher and Jorge Sabat suggests that the old adage to save three to six months of expenses might be overdoing it. Relatedly, piling money into an emergency fund might be a less effective use of your money if you have high interest rate debt still outstanding. This will look completely different for everyone. However, I want to be sure that I’m being as efficient as possible on my journey to become debt-free.
My Action Item
Update the math on my debt plan
This takes a little nerdy persistence. To truly get this “right” for me, I need to be crystal clear on the exact interest rates I’m paying as I wrap up some outstanding debt and student loan payments. I also need to know what all my savings and investments are earning me, and how that interest is compounding on both sides of the asset and liability equation. This understanding will ensure that I’m putting my debt and savings dollars to use in the most effective way toward my goals.
3. Maximize My Compensation
So, earn more money? Not exactly. During benefits season, a spin around my company website made me realize I’m not taking advantage of a bunch of employee perks that translate to increasing my overall compensation. Our compensation is made of salary plus bonuses, perks, and benefits. While getting the salary you deserve is a huge part of maximizing your comp, don’t miss out on other things that could be putting dollars back in your pocket.
My Action Item
Check Out Commuter Perks
My company offers a transit debit card that I can pay for with pre-tax dollars, so buying my monthly metro pass just got a whole lot (relatively) cheaper. I’m setting that up to auto re-load. In 2020, this will amount to me saving about 30 percent on my commuting costs! For your own hunt, look for discounted parking, reimbursements for taking public transit, or ride share opportunities. You’ll be minimizing those commuting expenses while also supporting your 2020 sustainability goals.
Understand All Non-Health Benefits
For most companies, you typically only get to enroll in medical and dental benefits annually. But a slew of more creative options are often available more than once a year. Companies are realizing that adding historically non-traditional benefits like access to pet insurance, fertility and adoption support, and other health and wellness offerings make us happier and more engaged at work. I’m dedicating a quiet Friday afternoon to going through my company’s benefits and perks page and comparing all the places I’m spending money with any discounts, programs, or company offers.
4. Become Financially Fearless
In fairness, this one is a journey for me, not a destination. Most of us live with some form of angst around money — Am I being paid fairly? How can I get out of debt? If I am saving and investing, am I doing what’s “right” for my goals? For me, becoming financially fearless doesn’t mean a flawless understanding of high finance. Instead, it means not avoiding anything that I don’t understand. It’s asking hard questions and getting under the hood of all of my financial accounts so at any given time, I know exactly what my financial health looks like.
My Action Items
Curate a Set of Financial Experts
I suspect we’re all growing ever-weary of “pink-packaged” finance that doesn’t really go beyond the basics. On the flip side, it can sometimes be a struggle to find podcasts and content that is sophisticated, relevant, and approachable. This year, I’m committed to slimming down the noise of financial talking heads I take in and instead committing to weekly podcasts and authoritative reads on finance relevant to my goals.
Share What I Learn
There are things that you do really well in your personal finance, and that I do too. Guess what? Those are probably different things, and we should definitely swap stories about them. In 2020, I’m committing to being ultra-transparent with my friends and family about what I’m learning as I research and act on my financial goals, with the hope that swapping insights around money will help take away its persistent taboo and get us all closer to our personal goals.
What financial goal are you going to act on in 2020?