Guest post by Kate Underwood
The new year is just around the corner. Are you setting big goals for your money in 2020?
Financial goals are often at the top of the list of New Year’s resolutions. It’s an ideal time to turn over a new leaf and change any habits that are hurting your financial future. So here are seven of the best money moves to make in the new year.
1. Start Your Emergency Fund
When you don’t have money set aside for emergencies, you’re putting yourself at risk. There’s no way to predict when an emergency will happen to you, but you’re guaranteed to face one eventually.
Too many people don’t have the money to cover a minor emergency of even a few hundred bucks. Car repairs and medical expenses are just a couple of possibilities. That’s why it’s so essential to build your emergency fund as soon as possible.
No matter your financial situation, do whatever it takes to save up a starter emergency fund to use for unexpected costs. You might gradually save $1,000 to start and eventually build up three to six months’ worth of your basic expenses. That money should cover you in the event of a job loss or other major emergency.
[Jonathan: Absolutely great advice here and indeed start with building up a reserve of at least 1000$, it will help you sleep at night]
2. Create a Budget and Track Your Expenses
The new year is also the perfect time to start budgeting. When you make a budget, you assign every dollar you earn a job. This helps ensure that you pay all your bills each month and spend purposefully.
If you don’t have much experience in budgeting, you can learn how to make a budget in Excel. It’s simple to customize your budget to your family’s income and expenses. Once you make one, you’ll need to track your expenses ruthlessly.
Keeping track of every penny you spend is enlightening since so many of us are unaware of how much we spend. Expense tracking shows you how accurate your budget is and guides you in creating next month’s budget.
If you’ve never tracked your spending, give it a go. You can choose among several digital platforms to assist you in expense tracking, or you can go old-school with a simple pen and paper.
[Jonathan: I know budgeting has this negative connotation to it but just see it as an intentional plan instead as we discuss in this podcast episode with Jacob]
3. Pay off Debt
Debt is an awful burden to carry and it hinders your ability to save and invest for the future. As 2020 begins, why not make it a goal to pay off your debts?
Student loan debt and credit card debt, in particular, are two big offenders. They often come with exorbitant interest rates, so the longer you carry a balance, the more you’ll owe.
If you have any outstanding debt, focus on how to reduce the total and get closer to financial freedom. Whatever strategy you employ, paying off debt is a smart move.
4. Use a Money Management Tool
A great way to get your money under control is by using a tool that gathers all of your financial information in one place. Personal Capital is one such program that does a fantastic job of showing you a complete financial picture.
These free Quicken replacements are also great options that help organize your entire financial life. They can track your spending automatically, assist with budgeting, monitor your investments, and update your net worth.
[Jonathan: If you know some great tools for us Europeans, feel free to add some in the comments below!]
5. Invest for Retirement
Once you have your emergency fund in place and start paying closer attention to your money, you should consider your future. Everyone needs to plan for retirement, even if you love your job.
Retirement may seem far off for you, or it might be approaching faster than you’d like. Either way, a good money move for the new year is to set up automatic investments. Putting aside 10 percent of your income into retirement accounts is a great start. If you’re already doing that, try to increase your contributions.
If you have access to a company 401(k), 403(b), or similar retirement account, be sure to contribute at least enough to get any matching funds your employer offers. Another valuable retirement investment vehicle is a Roth or traditional IRA. An IRA is especially useful for those who are self-employed and don’t have access to employer-sponsored plans.
Don’t put off saving for retirement until it’s too late! Get started today and give your money as much time as possible to grow.
[Jonathan: 401(k), 403(b) and IRAs are for our American friends, if you are from Europe, ask the HR rep at your company and/or ask your local bank for any retirement tax-advantaged accounts]
6. Cut Unnecessary Expenses
There are many ways to do this. While earning is a vital piece of the financial puzzle, many of us spend more than we need to. Your expense tracking can help you identify areas you might be able to cut.
One strategy for slashing expenses is to simply call your current service providers and request a discount. Internet and cell phone providers are often willing to negotiate lower prices to keep you as a customer. Also, shop around among other providers to learn if you’re getting the best deal.
Other ways to cut costs include examining your investment fees and looking into refinancing your mortgage or student loans. You could research different (possibly cheaper!) options for health insurance or car insurance, as well.
You might also notice some expenses that you don’t really need right now. If you haven’t gone to the gym in six months, for example, consider cancelling your unused gym membership. Perhaps you could drop cable or magazine subscriptions that are eating into your budget.
7. Protect Your Loved Ones
This one isn’t fun to think about. But if you pass away unexpectedly, it can leave your family with an extreme financial burden. Don’t let another year go by without life insurance and a will. These items ensure your loved ones will be taken care of in the event you pass away.
Everyone with dependents needs life insurance, plain and simple. If someone relies on your income or economic contribution, look into a good term life insurance policy that pays out roughly 10 times your annual income. This helps your spouse or other loved ones pay your final expenses and their continuing bills without major stress.
Plus, if you don’t yet have a will, you should create one soon. It’s important to have legal documentation of your wishes. A will lets you stipulate information such as who will care for any minor children, how your assets will be distributed, and who will handle your estate when you’re gone.
[Jonathan: This might sound like an odd money checklist item for 2020, but see it simply as protecting the ones you love. It is never too early for writing a will, mine is already written and it is true that I got weird reactions when I was setting it up :)]
As we close the door on 2019 and begin a new year, why not make some smart changes with your money? Narrow down your top financial priorities and take steps to accomplish those goals. These money moves will put you in a stronger financial position! Happy New Year!
About the Author
Kate Underwood is a freelance writer for Club Thrifty, a website dedicated to helping people dream big, spend less, and travel more.
I would like to thank Kate once again for this nice money checklist before entering 2020 and I hope it was helpful to you! And tell me, friends, what are the money goals you plan to work on next year? Any we have forgotten? Let us know in the comments below!
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