How to Make Financial Wellness a Priority in 2020

The beginning of the new year is the perfect opportunity to take a step back, reflect upon your successes over the past year, and begin to think about your goals for the following one. Financial wellness is a top priority and reoccurring New Year’s resolution for many people, but it can be a daunting task, especially if you don’t know where to start.

Here are some of our key tips for how to make financial wellness an achievable resolution in 2020:

1. Review Monthly Savings: A key exercise for financial wellness is to sit down and review your cash inflows and outflows to project how much you could reasonably expect to save on a monthly/annual basis to achieve your financial goals (buying a house, paying for children’s college, retirement, etc.). While budgeting can be helpful for identifying where some of your problem areas are, we recommend focusing on setting a target savings amount for each month and setting up an automatic transfer to the designated account. Once identified, setting up the automatic savings function on your bank account takes the responsibility and decision making out of your hands and helps you easily build wealth without thinking too much about it. 

2. Improve Credit Score: If you’re looking to buy a new house – or another large purchase – then you want to get the best interest rate available. Ensure that you don’t let missed payments on a credit card get in the way of that goal by lowering your credit score. Take some time to ensure that all of your credit cards have at least an automatic minimum payment on them (paying off entire balance at the end of each month is optimal). 

If you have multiple debt facilities with varying interest rates, consider if re-financing/consolidating your loans make sense. Also, Google “the debt snowball” for an effective strategy for paying off debt.

3. Review Retirement Contributions: Similar to the aforementioned monthly savings suggestion, automating your retirement savings through your 401(k) or other retirement account contributions helps you build wealth effortlessly. Maximizing contributions to your 401(k) helps stash away funds for your eventual retirement, and helps with short-term taxes, as contributions are deducted from your federal taxable income for the year. Learn more about retirement planning here.

Retirement Account Contribution Limits 2020:

• Traditional / Roth IRA: $6K

• 401(k)403(b)/401(a): $19.5K

• 401(k) Catch-up Provision (over 50): $6K

• SIMPLE IRA: $13.5K

• SEP IRA: $57K

4. Re-evaluate portfolio allocation: For your investment portfolios, it is important to review and make sure that your overall allocation has not fluctuated or negatively shifted as a result of the prior year’s market activity. This is not an exercise to try and time the market, or get to cute with your holdings, but rather to make broad strokes changes to get back in line with your long-term allocation. If you have questions about what allocation is right for you, our team of advisors would be happy to help.  

5. Re-evaluate Insurance Needs: If you are married or have children, reviewing life insurance is key to ensuring that your family is protected, in the unforeseen event that anything happens to you. If you own a home with a mortgage or have other big-ticket obligations, you must ensure that you have enough life insurance coverage for these liabilities, as well as at least a couple of years of lifestyle expenses to protect your family as much as possible. Depending on your cash flow situation, we recommend at least getting a term policy to get affordable protection in place. Whole life insurance may make sense if you can afford the much higher premium without cannibalizing other financial planning goals (these policies have substantial benefits much later down the line once the premiums have been paid and the cash balance has built up).

For property and casualty insurance, consider adding an umbrella coverage that matches up                                 with your net worth to ensure that you are protected if something were to happen on your property or in an accident.

Once you have tackled these key aspects of financial planning, you have made serious strides towards setting yourself up for financial wellness in 2020. If you have any questions regarding any of the topics discussed in this post or any other aspects of financial planning, please feel free to reach out to our team, and we would be happy to assist. Happy New Year!