Investing
Zoe Team
5 min read
Setting clear, actionable financial goals is the foundation for successfully beating your annual resolutions.
Consistency in saving and spending habits is more effective than short-term bursts of intense financial management.
Tracking your progress throughout the year allows you to adjust your strategies and stay motivated despite unexpected expenses.
Break large goals into smaller, manageable milestones and automate your savings to ensure consistency.
Focus on creating a realistic budget that tracks both essential spending and discretionary expenses to identify saving opportunities.
Yes, life circumstances change, so reviewing and adjusting your plan periodically helps keep your goals realistic and achievable.
A recent poll of 2,000 people revealed the top ten New Years Resolutions; saving more was one of the top five resolutions cited. In another survey, more than half of respondents said they wanted to save more. Saving more and spending less are goals consistently listed as top resolutions, yet few people are actually successful at reaching these goals. There are many reasons why many of us fail to reach our goals, and plenty of research that explains how to be more successful. Below are five easy steps to crushing your saving and financial resolutions in 2020.
Debt can be the biggest roadblock to financial security. The average indebted American household has about $135,000 in debt, with the majority of that in outstanding mortgages. However, credit card debt continues to be an obstacle to saving. These numbers can seem daunting and achieving any type of financial security an impossibility --but don’t despair!
If you have credit card, car loans or other types of consumer debt, be aware that this type of debt may come with high interest rates. Take time to learn about your interest rates and try to pay off the debt with the highest interest rate first.
Make an effort to call the credit card or loan company and see if they will work with you to lower your interest rate and/or develop a manageable payment plan.
Once you have a handle on your debt, focus on saving for an emergency fund, which should total about 6 months’ of necessities: enough to pay rent/mortgage, make car payments, pay for utilities and other bills, food and other needed costs.
You don’t necessarily have to be completely debt-free to start saving for an emergency fund. Focus on paying off high interest debt, developing a manageable payment plan on your overall debt, and then start saving gradually towards the emergency fund.
A recent study found that 69% of Americans don’t have $1000 saved in case of emergency, a scary discovery as unexpected costs pop up all the time. Cars break down, some health care costs may not be covered by insurance and job loss often occurs when you least expect it. The more prepared you are, the better you can handle life’s ups and downs.
An emergency fund can also keep you from liquidating stock at inopportune times or taking a loan out of your 401(k).
One of the best ways to save is through an employer-sponsored retirement plan like a 401(k) or 403(b). These accounts can provide tax benefits for long-term investors that may also translate to better returns over the long term. Your pre-tax contribution is invested—usually in a mutual fund or collection of equities and bonds—and grows tax-deferred. In retirement, your distributions will be subject to income tax, but it’s likely you will be in a lower tax bracket at that time.
Many employers also match employee contributions up to a certain amount, usually up to 5% of the contribution. This amount will also grow tax-deferred.
If you don’t already have one, a financial advisor is key to helping you achieve and CRUSH your financial planning goals. A qualified financial advisor can help you develop a plan based on your investing and lifetime goals, and establish steps along the way to help you reach your goals.
Be aware that most CPAs or tax professionals are not financial advisors. While some advisors can help with preparing taxes as well as provide tax and financial planning advice, many accountants and CPAs can give you tax advice but not financial planning advice.
Look for an advisor who is a CFP, which is a specialized designation for individuals requiring financial planning, investing, estate planning and tax education, and who must complete continuing education courses periodically.
Understand how your advisor will be paid. There are different ways that financial advisors get paid for their advice and work; make sure you have a clear understanding and discuss any concerns with your advisor.
Leverage a company like Zoe that can help connect you with a qualified financial advisor to suit your planning and investing needs.
Whether it’s developing a household budget, hiring a lawyer to put together a will or living trust, or reviewing beneficiary designations on your retirement accounts, consider setting aside time to create and review these documents with your advisor and family.
A recent study found that only 40% of Americans use a household budget to help manage finances. Yet putting together this simple guide can help you reach many of your financial goals—even those listed above. A budget doesn’t have to be a complex, 200-page dissertation: keep it simple, clear, actionable and changeable—and review it often as life and your goals change.
The beginning of the year is a good time to review your estate planning documents. These documents include any retirement account or annuity contract that lists a beneficiary (“beneficiary designation”), a living will or trust, title to property and power of attorney documents. Take the time to make sure these documents are current, and make changes when necessary.
As we learned from past years, time flies when you’re having fun. Take proactive steps towards reaching your financial goals and make 2019 the year you crush your resolutions.
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