Make 2020 the year you get your finances in order.
By Jenny Hoff
There is nothing like the start of a new year— and, in this case, a new decade—to motivate us to finally make major changes in our lives, like getting our finances in order.
The good news: Organizing your financial life doesn’t have to be done in a day or even a month. It can be done during the course of a year. But as New York Times correspondent and author of This is the Year I Put My Financial Life in Order, John Schwartz, realized, having a deadline is crucial to completing this task.
“Procrastination is a very fretful state,” he says. “You worry about whether you’ve done enough and it just sort of hangs on you like a weight on your shoulders. Once you start taking care of the chunks, you feel that lift and it’s a great feeling.”
If you’re ready to get your financial life in order, check out this month-by-month guide to getting organized.
Create a detailed budget and a separate savings account. Write down your take-home pay after taxes every month, along with your fixed costs, variable costs and investments. Make sure you aren’t spending more than you are taking in and adjust to put something away every month for emergency savings. Pro tip: Structure your budget so 20 percent of your earnings go into a savings plan.
Check your credit score and credit report. You can keep tabs on your credit score for free through a site like creditkarma.com, but you should also check your credit report once a year through annualcreditreport.com. Make sure you recognize all the accounts under your name and dispute anything that seems suspicious.
Gather information on all your 401(k)s, stocks and other investments from previous jobs and roll it all into one plan or organize it in an easily accessible binder.
Use an online retirement calculator from Vanguard or another investment firm to get an overview of your nest egg, expected future costs and your overall financial outlook for the future.
Cancel unused subscriptions/ memberships.
Renegotiate fixed costs.Check whether you could get a better mortgage interest rate or lower phone bills, cable bills, car insurance, car payments, etc.
Contribute to a 529 savings plan if you have children. This tax-savings vehicle can be used to pay for college or even private school in the early years. If you don’t have children, check on any other tax-savings vehicles you could be contributing to, like a solo 401(k) for entrepreneurs, Roth IRA, etc.
Create a will and trust.Update beneficiary information on all accounts and investments.
Cancel cards, if necessary. If having multiple credit cards (or any at all) leads to overspending, cancel your newest cards first but keep your oldest account open (cut up the card if you have to) for credit-score purposes.
Consider asking for a raise. Many companies make their salary decisions for the next year by Dec. 1. If you’re hoping for more than the standard percentage increase for next year, start initiating the conversation with your boss.
Get adequate insurance. Open enrollment for health insurance is usually between Nov. 1 and Dec. 15. Make sure you have the right life-insurance policy for your family’s needs and disability insurance in case of an emergency.
Organize your info, make copies and store it in a safe place. Now that you have all your investment information, your insurance-policy information, your will and other financial information, make copies of everything important (house title, car title, etc.), and organize the information by category in two big binders so in the event of an emergency, all your crucial information is easy to find.
It’s a new year and these steps will get you on track to a new financial future. By knowing where you stand, preparing for emergencies and getting organized, you can start building wealth and a more secure future.