Regardless of your current financial situation, there’s always room for improvement. As a common practice, many people make changes to their long-term financial plans as they approach retirement. But then again, it is essential to re-examine your financial plan in the short term in order to solve current issues or achieve a new financial goal in the coming year.
Your 2019 financial goals may have included getting out of debt, making plans for retirement, or even cutting cost to save money for a home. The 10 tips that follow will help get you on track, and help you achieve financial success in the coming year.
Table of Contents
1) Initiate a Spending Review
If you intend to cut down on your spending and save more money or pay off your debtors, you can begin with a spending review. Take a closer look at everything you spent money on the previous year. Did unexpected spending come up? Would it be more beneficial to save your money for vacations and taxes in a different account? Once you are able to answer these questions, you will get a better perspective of your spending, and consequently, you will be able to draw-up a better plan moving forward.
2) Max out Your 401K
For people who intend to scrape more into your savings as you near retirement, you should give a serious thought to making larger increments to your 401K contributions. Start by seeing how close you are to the annual maximum of $18,500 and then raise the amount in contributions to suit your case. For people who are 50 years or over, they can go ahead and raise their contribution amounts using a catch-up contribution plan of an extra $6,000. Always remember that this pre-tax deferment into a 401K account can cause your tax rate to reduce.
3) Review Entertainment Subscriptions
Our world today is filled with a lot of merriments which causes us to spend money on services that we barely even use. This is amongst the easiest ways to save money every month. Only subscribe for services that you often use, rather than subscribing to several services that you would end up using one or two times in an entire month. In some cases, one-time payments are more cost-effective as compared to continuous subscriptions. For instance, you can pay for a single season of a specific TV show rather than monthly subscriptions to a video service that you may use once or twice.
4) Rebalance Investment Accounts
You need to match your new financial goals with a corresponding financial plan. Despite the fact that some portfolio managers will help you rebalance on a quarterly basis, always ensure you do this at least once a year. Tailor the weightings of your portfolio to match the new goals that you have set for yourself. Also, sell or buy assets to make it consistent with the asset allocation you want. Once you rebalance these aspects of your finances, you can either raise or lower the level of risk for your investments.
5) Donate to Charities
If you have serious concerns about tax season, then you should make donations to prominent charity organizations, as this will reduce your tax bill. Regardless of your means of donation; cash or home equipment, you will be issued a receipt upon donation which is then taken from your tax when the time comes.
6) Fund 529 College Savings Plans
If you’re either planning to further your education or to saving up money for your kid’s college education, a 529 plan is useful in saving for school with pre-tax dollars. In addition to the already existing advantages, you are exempted from paying federal or state income tax on the earnings, given that the money withdrawn is aim to making payments for college or graduate school tuition, fees, room and board, or even books. Additionally, in some cases permits you to get a tax deduction for your contribution.
7) Protect Your Identity
There is no better time to run a check on your credit report than the beginning of the year to ensure that your identity is fully protected. Everyone has the right to a free credit report every year through AnnualCreditReport.com. This is the only site that is authorized to give out credit reports for free. Once you re-examine your report, you can easily view all the accounts in your name, and confirm that your credit has not been compromised.
8) Evaluate Healthcare Accounts
Do you have a Flexible Spending Account (FSA)? Make sure to spend the funds in that account before the 31st of December, because as they say, “use it or lose it.” You can get an appointment with your eye doctor as this the most effective ways to spend FSA funds buy using it for glasses, contact solutions, and so on. Additionally, you can get other medical appointments set for the fact that the funds can reimburse copays. Also, a Health Savings Account (HSA) will allow you to rollover your funds to enable you to save more. If you own this type of account, then you should give a though to contributing the annual maximum amount as this will be something that you can fall back on in retirement.
9) Update Accounts and Documents
It is very essential to review accounts and documents yearly such as covers insurance amounts, legal documents including trusts and wills. In this reassessment, you can change how much money you reserved for what purpose as well as the beneficiaries. For instance, you want to reserve a substantial sum for your grandchild if you become a grandparent.
10) Evaluate Debts
Debts like mortgages, car payments can be considered “good” debts. Also, they are debts that stall you on your journey to your goal. You should draw-up a schedule to pay your debts when due, even if the amount has become higher because of the need for more medical attention, home or car repairs that you did not anticipate, or credit card bills. If you don’t want high interest payments to weigh in on you, always ensure that you pay above your minimum payments every month.
If it seems impossible to even pay your minimum payments every month so look out for other options that can help in easing the high interest that accompanies debt; such as debt consolidation loans or balance transfer credit card offers. The Freedom Debt Relief program would be a viable option if your debt is huge ($15,000 or more). If you’re eligible, there are companies who can get you out of debt quickly, while making minimum payments.
By adopting these 10 steps, you would have conducted an annual assessment that would position you to achieving financial success in 2019.