By Thomas Britt
It’s not only the start of a new year, but also a new decade! That probably means you’re feeling more motivated than ever to make some positive changes and set healthy habits for your life. But whether you want to decrease your screen time, invest in your family, or start a new exercise routine, it’s not going to happen unless you make a plan. Your good intentions need to be coupled with practical steps in a realistic time frame or you’ll give up just as you get started.
And since finance-related resolutions consistently fall in the top five most popular New Year’s resolutions, (1) we wanted to make it easy for you to take action on your financial goals by giving you 5 ways to jump-start your finances in 2020!
1. Learn From the Past
Before diving deep into the details, take a moment to get a big picture of your finances. Have you picked up some less-than-stellar spending habits? Do you feel regret at how you’ve spent your money or neglected to save? Are there certain areas you excel in? Whatever your financial life has looked like in the past, don’t let your mistakes keep you from moving forward. Instead of dwelling on what you wish you could have done differently, learn from your mistakes, reflecting on what worked and what didn’t. Then take your newfound insight and wisdom and move forward. Take stock of your current financial situation, including income, savings, debt, and expenses, and decide what you want them to look like in both the short term and long term.
2. Banish Debt
If you are ready to start conquering your goals, one of the first steps you need to take is to eliminate debt. When you pay 10-30% interest on any number of credit cards or loans, you limit the amount of money you have available to put toward your goals, whether that’s maximizing your retirement account or going on a dream vacation. Become relentless about reducing your debt and interest costs, and consolidate accounts where you can.
If you have a loan with a significantly higher interest rate than the others, you may want to work on paying off that one first. Or, if you’re feeling overwhelmed by debt, try paying off the loan with the smallest balance first, no matter the interest rate, to gain some momentum. Use a debt calculator to calculate out how long it will take to pay off your debt, then build extra payments into your monthly budget so you aren’t tempted to spend that money elsewhere.
Creating an emergency fund can help you avoid accumulating more debt. By setting up a liquid, easily accessible savings account, you won’t have to rely on debt to cover those inevitable life expenses, such as home repairs or medical bills. Create this cash cushion by putting aside money from each paycheck until you have enough to cover approximately three to six months’ worth of living expenses. You will never regret having an emergency fund at the ready.
3. Make a Savings Plan
If you aren’t already saving for your future, the sooner you start, the better. And if you’re already saving, find ways to save more by cutting back on expenses, channeling a healthy percentage of any raises and bonuses directly to savings, and automating savings increases of 1% of your paycheck every few months. It may not seem like you are making much of an impact, but every dollar helps. Your increased savings can be invested into your company 401(k) or 403(b) plan or your personal IRA.
Then watch the magic of compound interest grow your money over time as you earn interest not just on your principal but your interest as well, making your money work smarter rather than harder as you pursue your goals.
4. Invest With Purpose
On the savings note, make sure you’re investing your hard-earned money properly. Anyone can close their eyes and pick a random mix of mutual funds to invest in, but having a customized retirement plan based on your circumstances, goals, and risk level is what will get you from point A to point B. Asset allocation is the most critical investment decision you can make, especially in our current volatile market.
Work with a financial professional to determine your risk tolerance level and create an investment strategy that will give your portfolio a clear sense of purpose. It’s also critical to rebalance on occasion to ensure your portfolio is still aligned with your goals and time horizon.
5. Join Forces With a Financial Professional
Whatever your situation, whatever your goals, a financial professional can walk you through each of these steps to get your financial plan in shape. You’re much more likely to make your New Year’s resolution a reality if you have a concrete plan in place. At Benchmark Wealth Management, we believe that a strong planning process is the best way to create a more financially secure plan. If you want our help to create a customized, detailed blueprint of what you need to do to meet your goals, please call 860.434.6890 or email me at thomas.britt@bwmllc.net to arrange a consultation.
About Thomas
Thomas J. Britt is managing director of Benchmark Wealth Management, LLC, with 20 years of experience in the financial industry. He specializes in executive financial planning, retirement planning, investing, as well as the management of trusts and endowments. Thomas is a Certified Financial Planner™ (CFP®) professional and holds the Master Planner Advanced StudiesSM (MPAS®), Certified Investment Management Analyst (CIMA®), and Chartered Retirement Planning Counselor (CRPC®) designations. He earned a Bachelor of Science in Finance from the University of New Haven, an MBA in financial technology from Rensselaer Polytechnic Institute, and a Master of Science in Personal Financial Planning from the College for Financial Planning. He is also a proud veteran of the United States Navy Submarine Force. Learn more about Tom by connecting with him on LinkedIn.
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(1) https://vitagene.com/blog/most-popular-2019-new-years-resolution/