10 Money Moves to Help You Ring in the New Year

The start of a new year is a time to reflect on where you are and how you’ll shift focus to your goals for the future. While making resolutions for your career, health and relationships, don’t forget to give some thought to your finances. Here are ten strategies to consider for the year ahead. 

1. Take Stock of Your Situation

When you know where you are, you can chart a path to where you want to be. Set financial goals for the next year, five years and ten years, and write them down so they’re clearly defined and easily referenced throughout the year. This list can serve as the basis for selecting the strategies that make sense for your personal planning. 

2. Create or Update Your Monthly Budget

A budget is the foundation of your financial strategy. While everyone’s expenses are different, the 50-30-20 Rule can serve as a helpful framework. It suggests allocating 50 percent of your budget to needs, 30 percent to wants and 20 percent to savings and investments.

As you go through this exercise for a new year, take into account any changes in salary or benefits, cash windfalls and price increases for the things you spend on regularly. And don’t forget to include any expected “one-off” costs you may have coming up, like wedding gifts or a new car purchase.

Putting Your Year-end Bonus to Work

If you received or will receive an end-of-year bonus and/or raise, you may want to put that toward some of your short- or long-term goals, such as:

• Paying down debt

 

• Starting or growing your emergency fund

 

• Increasing contributions to your retirement account

 

• Saving for other objectives, like paying for education or buying a house

 

• Investing in yourself, whether that’s taking classes or starting a side hustle

 

3. Focus on Debt and Credit

While it’s important to make timely minimum payments across all your debts—to avoid both penalties and dings to your credit score—paying even a little more than the minimum can make a big difference. Doing so helps you keep interest at bay while also making progress on the principal. To start, you might consider increasing payments toward debts with the highest interest rates (e.g., credit cards), or paying off your smallest balances first to give you confidence to tackle the rest.

Also, take a look at your credit report to assess your situation and check for any inaccuracies—you can dispute anything that doesn’t look right.

4. Establish or Grow Your Emergency Fund

Life is full of expensive surprises, so it’s good to be prepared with at least three to six months’ worth of living expenses in an easily accessible account. This can be a daunting number (and one you should consider doubling if you’re caring for children!), but understand that you’re not expected to fund this account all in one go. Break it down into smaller increments and build it up over time. And if you do need to dip into your reserve, aim to top it back up once you’re on more steady financial ground.

5. Save for Retirement

Even if retirement feels far away, saving early is key, as any interest and investment earnings can compound over time. Keep an eye on your timeline and check that your retirement plan contribution level has you on track toward your target, using an online calculator or working with a financial professional. If you’re not maxing out your 401(k)/403(b) or Individual Retirement Account (IRA), doing so before the end of the year may help you lower your taxable income, which could benefit you come tax time.

6. Save for Other Key Goals, Like Education

If you plan to contribute to a loved one’s education expenses, look into specialized education savings accounts, like 529 plans, which allow tax-deferred accumulation of savings and tax-free withdrawals for qualified education expenses. This is another situation in which increasing contributions before year’s end can potentially have a favorable impact on your tax bill.

Other short- or medium-term goals you might be saving for could include paying for a wedding, buying a house or donating to charity. 

7. Prepare for Your Annual Tax Filing

It’s never too early to start planning for tax season! Now is a great time to speak with an accountant about managing your tax strategies for the upcoming year, including navigating charitable giving and determining the best investment-related tax tactics for your needs. Quick tip: to streamline things before filing, gather any relevant documents as you receive them and store them somewhere secure. 

8. Safeguard What You Hold Dear

‘Tis the season for increased online shopping, travel and other activities that can expose you to risk. Putting a cybersecurity plan in place can help you protect yourself. Consider establishing alerts to monitor online mentions of yourself, tightening up privacy settings, and exercising caution when linking accounts and sharing personal details on social media. Be especially guarded with your online financial accounts!

Insurance offers another way to help protect yourself, your family and your assets. Beyond essential health care coverage, you may want to consider life, disability and/or long-term care insurance. If you’re signing up for new policies, you’ll be asked to name beneficiaries so that any payments go where you want them to. If you already have them in place, the New Year is a good time to ensure they still reflect your current family situation.

9. Think About Your Loved Ones and Your Legacy

The holidays are a time to focus on family. Remember to check in with loved ones so you’re on the same page when it comes to the family’s finances and future. Ensure they are provided for by getting estate planning documents, such as a will or power of attorney, created or updated.  Then, identify and arm your Emergency Manager—a trusted friend, family member or professional who has access to your key documents, accounts and passwords in case you’re suddenly unable to manage your affairs.

10. Prioritize Your Well-being

The past few years have been a lot to manage—personally, professionally, financially, physically and mentally. Give yourself credit for wherever you are on your journey, and hold space for self-care. Whether that’s starting a meditation routine or downloading a budgeting app—every small step adds up.

The Bottom Line

With a new year comes the opportunity to reflect and reset. When it comes to your money, there are plenty of steps you can take to get on track toward your goals—but remember, you can take them one day at a time. If you need any help along the way, don’t hesitate to talk to a professional—an attorney, a tax advisor, a Financial Advisor, or all three—to discuss your unique situation.