facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Top 10 Financial Planning Tips for the New Year Thumbnail

Top 10 Financial Planning Tips for the New Year

Happy New Year!                                                                                                                                

2020 is here, making now a great time to set yourself up for success in the coming year by making some small changes. Today, I’ll cover ways you can set yourself up for success with a few financial planning tips. The new year is the perfect time to revisit these items, not only because it’s the time when we’re typically setting goals for the year, but also because you’ve got a whole year to implement them.

Read on to learn my 10 financial planning tips for 2020!


1. Prepare a Budget


I’m always amazed when I ask people how much they think they can save in the year and they say, “I have no idea.” That’s why it’s so important to have a budget. You need to know what your spending and income is going to look like during the year so you don’t spend more than what you’re earning — and so you can craft a savings plan for yourself.

When creating your budget, take a look at last year’s tax returns and see what your taxable income was. This can be useful to use as a starting point. If you still manage your checkbook manually, calculate what your expenses were for the last year. If you do it online, you can likely pull up your expenses right from your bank.

When looking at expenses, it’s important to make sure you’re looking at a full year, not just one or two months, because there are often expenses that may not always be monthly, like insurance payments or gifts for the holidays. All this information can help you project what your expenses are going to be in the future so you can plan ahead.


2. Save More Money


One of the things you can do to save more money is to make sure you don't spend on things you don't really need — like subscriptions.

There are many subscription services out there these days for everything from the xBox to phone apps. Often times, what happens is you purchase these subscriptions, use them for a bit, and then forget about them. But what do all these services have in common? They automatically take money from you. And they auto-renew. So, unless you go into your credit card bills and look at those subscriptions, you don’t even know that they’re there. And if you’re doing a free trial, it’s easy to forget to go back and cancel it before it starts pinging your credit card.

So, a simple way to save more money is to make sure you go through your credit card statements and see what those subscriptions are. That way, before it comes up again next year, you can make a decision on whether you want to keep it or cancel it.

There are other small ways of saving more, like considering your daily spending habits. If you're spending five or $10 a day on coffee, that’s $2,400 a year. If you give up that expensive coffee each day, what could you just do with that extra $2,400?

How about increasing what you put in your savings or your 401(k) each month? You could probably also figure out a less expensive way to get your coffee every day. I guarantee everybody out there has something in their life that if they give it up, won't miss it. If you do try and give something up but end up missing it, you can always go back — but at least try and give it up so you can increase that savings amount. You'd be surprised how these little things add up.


3. The Ideal Place to Save


Now that you’re saving more money, let's talk about where you can save that money. Where’s the ideal place to save? Retirement accounts like 401(k) plans, profit sharing plans, and IRA plans. Why? Because the government's going to allow you to put the money in pre-tax and to grow it tax deferred.

With the money you're saving, you want to increase your retirement savings so you can get to that maximum number. When you have a 401(k), the maximum amount is around $19,500 for 2020 (up $500 from last year). If you're over 50, you can put another $6,500 away, getting you up to $26,000. If you're over 50, don’t forget to make sure your plan has allowed you to do that extra $6,500. If you're lucky enough to be in your own business, you can now put even more money away. You can put up to $57,000 away between different plans — so look at trying to get the maximum that you can put away, and even if you can't reach the maximum, put the most away that you can before it really hurts.


4. Taxes


In 2018 we had the new tax law come into place. This affected how much you have to withhold on your paycheck, and now for 2020, they've come out with new withholding tables. So this year, make sure you’re withholding enough (or that you’re not withholding too much) based upon what you're earning. You don't want to have any surprises when it comes time to pay your taxes in April.


5. Pay Down Debt


Another thing that amazes me are people who don’t pay off their credit card each month. It just boggles my mind that they are paying double digit interest rates, plus a fee, because they were lazy or forgot to pay off their credit card. If you use credit cards, it's important that you pay it off each month. And if you have to have some balances on there, before you save money into your retirement accounts, take your extra savings and pay down those debts. Get rid of those ungodly interest rates on your credit cards. And if you do have credit cards, you need to know what your budget is so that you don't overdo it and end up not being able to pay off your balance each month.

One debt that I, and most people like, are mortgages. For those who have mortgages and are maxing out their retirement accounts, another great way to save is to make an extra payment on that mortgage payment. It can chop off years on those mortgages and bring you down from 30 years to less — and I can't tell you how great a feeling that is.


6. Review Your Investment Portfolio and Asset Allocation


2019 was a great year for the stock market. But the market doesn't just go up every year. That’s why, depending on your time horizon and risk tolerance, you want to look periodically at your asset allocation. Here at Heller Wealth Management, we look at asset allocation four times a year, but you want to make sure you’re doing this at least once a year.

When reviewing your investments, it’s also useful to consider: Do you want to take some of your profits on things that did really well and move them into other categories? Now might be the time to sell high and buy low. You're not going to be able to time it perfectly, but what you'll be able to do is make sure that you're not accumulating too much in one particular class.

You might also want to look at your non-retirement account assets. When are you going to use that money? How much cash do you need? Do you have too much in the stock market? Should you have some more money in bonds? Put together a game plan, review the asset allocation, and then decide where you should save any additional money and in which classes.


7. Recalculate Your Insurance Needs and Review Your Insurance Policies


Nobody likes to pay for insurance. But whether it's life insurance, disability insurance, medical insurance, or homeowner’s insurance, it’s always useful to pull out your policies at least once a year and see what the coverages you have are and what you're paying for. Make sure you don’t get complacent with your insurance. Shop around and find the best fit for you. Look at your life insurance needs. Did you have another child and need to increase your insurance needs? Or maybe you don't need as much insurance anymore. Perhaps you're getting older and haven't thought yet about long-term care insurance. Each year, go through and review the policies, look at the premiums and the coverages, and speak to a professional to make sure you have the right coverage.


8. Rebuild Your Credit Score


At least once a year, you should go and check your credit score. There are three agencies where you can do this for free each year. In case you haven’t heard it already, I did a podcast on credit scores with Leslie Tayne a while back. If you're interested in hearing more on how you can improve your credit score, you can listen to that episode here. Leslie spoke about how important your credit score is and how it can change in retirement — even though you're not doing anything. That’s why it’s so important to go and see if you are taking little hits to your credit score and to look at ways you can rebuild it.


9. Review and Update Your Wills and Related Documents


This one you don’t have to do every single year — maybe every couple of years. But it definitely can't hurt to look at these documents once a year and see who the executor is, who the trustees are, and who the beneficiaries are. Make sure you also look at the beneficiaries on your IRAs and 401(k)s and life insurance policies, because those go before your wills. Nobody wants to leave this earth with the rest of the family fighting over what's going to happen.


10. Review Your Retirement Plan


I always say that it's never too early to start planning for retirement. If you've gone through tips one through nine, you should be ready to visualize your retirement plan and how you can afford to retire with the lifestyle you want. In fact, there are studies that say if you plan, you're more likely to have a successful retirement.

So, start to think about how you want to retire right and meet with an advisor who can help you. Of course, that's what we do here every day at Heller Wealth Management. We look at people’s plans and make sure that they’re on track so they can live better lives now and in retirement.

And that’s it for my top 10 new year planning tips! I hope you'll put each of these tips into place, and if you need any assistance, we'd be glad to help! Just reach out to us here at HellerWealthManagement.com.