Well, everyone. That time of the year is quickly approaching. Christmas is nearly over and you all need to settle on a new resolution for the new year. I mean, if you’re into that thing. You know that many people don’t even bother with it. After all, how long do these resolutions even last? Many people won’t even make it through the end of January before they have broken that resolution.
The problem isn’t in the desire to do differently. The problem is in the will. But, for those of you who have a strong will and routinely look for ways to improve your lives, let’s consider some changes that can be made for the 2020 year that can significantly improve your finances. Kevin Mercandante, over at Investor Junkie, has given us five resolutions that we can put into place to make our financial picture better next year.
When it comes to New Year’s resolutions, it’s not the promises we make to ourselves in January, that count, but sticking to them throughout the rest of the year… and beyond. Nowhere is this truer than when it comes to finances and investing.
If you want to improve your finances and investing this year, pick one or two resolutions this January and commit.
You don’t need to make major changes — simple moves like tweaking your investment strategy or adding to your savings can go a long way toward improving your financial outlook.
Here are five examples of things you can do in 2020 to improve your money situation not only for the new year but for the new decade.
1. Pick One New Career Skill to Master
Career is probably the most under-appreciated financial area for most people, but it is also the most basic. Not only does it enable us to afford our lifestyles, but it also represents the primary source of investment capital.
This being the case, we need to make continuous improvements in our ability to do our jobs well, in order to be promoted and increase our income.
Since this is a new year, pick one new career skill to learn and master. It should be a skill that will enable you to either do your job better or prepare yourself for your next career move.
We often think dramatic improvement is necessary in order to advance in our careers when in truth, it’s best done in small steps. This may be a chance not only to learn a new skill, but to become so good at it, others can’t help but notice.
Once this happens, the money will follow. The key is to pick at least one skill and follow through on it. If you do this each year, your career will grow over time. The New Year is the perfect time to embrace this.
2. Get Serious About Paying Off Debt
If you have a lot of debt, it probably won’t be practical to make a resolution like having it all paid off by the end of this year. However, you can start whittling it down in small chunks.
Even if it takes you several years to accomplish the goal, it will eventually happen, but you have to get started now. And the New Year is the perfect time to do it!
There’s nothing dramatic you need to do here. If you resolve not to take on any new debt this year and faithfully make all of your debt payments for the balance of the year, you will owe less money by next New Year’s Day.
You can fast-forward the process by adding a little bit extra to each monthly payment, to accelerate the paydown of each loan.
Alternatively, you can make the minimum payments on all of your debts but select one for complete extinction by the end of the year. The impact can be particularly significant if the debt you target for payoff is a car loan or your largest credit card bill.
Let’s say you have a car loan with a $400 monthly payment and a $7,000 balance. By paying off that single loan, you’ll free up $400 in extra cash flow each month. This can open a lot of doors to you to pay off additional debts or to direct money into savings and investments. Resolve to do it this year and start right now.
3. Set Up a Payroll Savings Deposit
If you are a little bit light when it comes to savings, the New Year is an excellent time to commit to improving the situation. If you aren’t doing so already, start a direct payroll deposit into your savings account.
It doesn’t have to be a tremendous amount of money. If you are paid biweekly, you can save $1,300 by the end of the year just by directing $50 out of each paycheck and into your savings. It’s not a fortune, but it’s a start.
4. Increase Your 401(k) Contributions
The New Year is also an excellent time to increase your 401(k) contribution, at least by a little. And again, you only need to do this in small increments.
If you are contributing 10% of your pay to your plan, you can increase it to 11%. The increase will be small, not the least of which because lower payroll taxes will offset part of the increase.
You can make a longer-term plan to increase your contributions to 15% over five years, by making the same increase each year — upping your contribution by 1% each year for five years. But to make that happen, you have to get it started, and the New Year is the perfect time to start.
5. If You Aren’t Beating the Market, Switch to Index Funds
A New Year is also an outstanding time to change investment strategies if it’s needed. If you’ve been picking your stocks or using actively managed funds but not beating the market (despite our best advice), now is an excellent time to punt and move your investments over to index funds.
With index funds, you’re guaranteed to at least keep pace with the general market, there will be lower investment fees, and you won’t need to concern yourself with stock selection and tracking, or to manage your portfolio again.
An easy way to invest in index funds is by using a Robo advisor. These services use computer algorithms to determine the best mix of funds for your portfolio, taking your investment goals and risk tolerance in mind.
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None of these strategies individually will dramatically improve your finances and investments in the coming year. But the combination of all five will be a good start. And that’s the point of New Year’s resolutions — to get started.
Life is Strange. Live it Well.