When you reflect on your financial decisions in 2019, you may have some regrets. Maybe you incurred debt or didn't put away as much as you intended for retirement. If that's the case, you're not alone.
Nearly a quarter of millennials polled in a recent survey from credit card comparison site Finty say they've done nothing to prepare for retirement. Meanwhile, 4 in 10 Americans don't have enough money saved to cover a $400 emergency or unexpected expense.
Above all else, what Americans want this holiday season is to be debt-free, according to a Country Financial poll of more than 1,000 adults in October. Yet the average person would need nearly $59,000, on average, to pay off their debt in full, Country Financial found.
You can do a lot to improve your financial health and set yourself up for success in 2020 by making six simple money moves, says Marguerita Cheng, a certified financial planner and the CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
"You might be saddled with a holiday spending hangover, but now is the perfect time for a little financial cleanup," she says.
Here are six smart money moves Cheng recommends you make to have a financially healthy and happy new year.
Looking up your credit report is a perfect jumping off point to getting your finances in order, says Cheng.
You can use a free service like Annualcreditreport.com to find out if there are any mistakes, missed payments, or delinquent accounts that are dragging down your score. "There could be nothing wrong, but it's better to find out than be in denial," she says.
Be on the lookout for changes in terms and conditions on any lines of credit, too. You may have opened up a credit card that promised no interest or annual fees, for example, but that sign-up promotion could expire come January 1.
Read the fine print, and if you don't understand something, call the number on the back of your card.
Sitting on the phone with customer service over your holiday break can seem daunting, but Cheng says there are ways to avoid long wait times. She suggests calling in the middle of the month and the middle of the week. "You never want to call when bills are due, or on Mondays or Fridays. Those are the days when people tend to review their finances."
If you have a home loan, consumer credit card debt, outstanding student loan, or an auto loan balance, figure out which loans have the highest interest rates. "If your goal in the new year is to pay off debt, make sure you tackle loans with the highest interest rates first," says Cheng.
High-interest debt can drag down your credit score and harm your overall financial health since compounding interest works against you. It's essentially the snowball effect: Not only do you accumulate interest on your initial deposit, you'll also accumulate interest on the interest you just earned.
The Fed has reduced interest rates, which makes this a good time to refinance a loan. A lower interest rate could decrease your monthly payments, helping you pay down debt faster and lowering the total amount of interest you have to pay.
"Increasing your 401(k) contributions by just 1% is better than nothing," says Cheng.
And if you don't have a corporate retirement plan, she says, "don't worry, not all is lost." Start making small contributions to an IRA. As long as you have earned income, you can open one. They offer tax advantages, can be low-maintenance, and take just minutes to open.
If you're a parent, you may be worried about setting yourself up for retirement and saving for your child's college education. Instead of getting overwhelmed, Cheng says, try to look at it this way: "Don't focus on what you can't do: Focus on the progress you've made. ... It's not all or nothing."
One of Cheng's clients was overwhelmed to realize that, to someday cover her child's tuition, she would have to put away $1,100 a month. "That's not realistic. She had to pay her bills," Cheng says. Remember, though: "You don't need to contribute all of it today. Just start by putting away what you can."
In addition, she suggests taking a "set it and forget it" approach: "Go automated to take the emotion out of it. Set up an automatic withdrawal into a savings account, contribute whatever amount you can afford, and after a few months, you'll be surprised by what you've managed to put away."
In addition to making small contributions towards paying down debts and saving for the future, prioritize building an emergency fund. Ideally, you want to have money to cover three to six months of expenses in cash set aside in a checking, savings, or money market account.
Cheng's advice is to start small.
Let's say you need new tires. "Having an emergency fund can make that unexpected expense a little less painful," she says. "Maybe you only have $500 [set] aside and the tires cost $800. Charging the $300 difference on a credit card is a much more manageable sum to pay off."
The new year is also the perfect time to think about who you want to designate as the beneficiary on your savings account or insurance policy, if you have one. "The holidays are over, you just saw your niece, nephew, or godchild. It's the natural time to think about including them," says Cheng.
Video by Mariam Abdallah
If you look at your calendar for the year ahead, there are probably costs you can anticipate in advance. Cheng suggests you take an hour to figure out what unavoidable expenses you'll be incurring in 2020.
Even those fun events on your 2020 calendar can cost you. If you're a bridesmaid or a groomsman, or if you're attending a faraway wedding as a guest, for example, figure out how much you need to save over the course of the year to make those out-of-pocket costs sting a little less, she says.
In addition to saving for celebrating others, she says, "it's OK to compartmentalize. Set aside funds for things you want to do."
If your goal for the new year is to travel to Asia, for example, use the prospect of your trip as motivation. Set aside a little each month and, even if you aren't able to shore up enough to cover the whole tab, the money you save will ease the financial pain you'll feel later.
It's OK to use a credit card to book airfare in advance to lock in a better rate, as long as you prioritize paying off your bills and continue to save cash for the other costs associated with your travels, she says.
"People say your new year goals should be specific, measurable, achievable, and realistic. I actually switch the 'r' out and say rewarding. It's OK to celebrate your milestones and successes. People fall off the wagon when they feel like they're working so hard and have nothing to show for it."
The new year is a "time to be honest with yourself. If you wished you put away more in 2019, challenge yourself to put away a little more in 2020," Cheng says.
Challenging yourself doesn't mean depriving yourself. "I'm not telling you to sit in your house and be bored. Your social life is important. But when you go out to dinner, instead of ordering two drinks and a dessert, order one drink and share the dessert. The money you save over time will add up."
When it comes to material purchases, it can be tempting to buy new outfits for each event or the upcoming season. "It's OK to splurge, but make some sacrifices. Wear the same dress twice and buy an accessory to change up your look instead of buying an entire new ensemble," she suggests.
Shifting your mindset around spending can really help, Cheng says. "I tell my clients: I'm asking you to save today and I understand it may seem like you have to give up something today, but I want you to save today so you will have money to do what you enjoy today in the future."
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