Are you looking to make better financial decisions in 2020? For many Americans, the New Year provides an opportunity for a fresh start. Despite what may have happened in 2019, this clean slate gives every person the chance to make resolutions that can set you on a path to reach your financial goals. Below are five resolutions to build a stronger financial future:
First, build a budget to organize your finances
Think of a budget as the foundation for your financial house. Organizing and prioritizing finances must take precedence before developing financial goals. Budgets help you understand financially what you have coming into your accounts and what’s going out. Once you have that established, then create a financial plan that accounts for unexpected costs such as medical bills or money to cover the loss of a job. This is especially important as you transition into retirement, as both income and expenses can drastically change during your golden years.
Consistently contribute to your retirement accounts
For many, retirement may seem far away, so saving for it now may not be a top priority. This can be a grave mistake. There is the reason why Albert Einstein has been quoted as saying that compound interest is the eighth wonder of the world, so it is important to save early and let your money grow. If you have a 401(k) through your employer, contribute at least as much as your employer will match in contributions. Look into options for health savings accounts. In addition to employer plans, you can also open an IRA or Roth IRA. Regular contributions to accounts like these can be one of the best ways to build wealth over time.
And thanks to the SECURE Act that was recently signed into law – there is no longer an age limit for contributions to traditional IRAs – which means you can keep building your wealth through retirement.
Ensure your insurance
Having the right insurance is critical to your financial health. Make it a priority to review all of your policies to ensure you are capitalizing on the best rates, and you have the appropriate coverage to match your financial needs. Ask yourself these questions: Do I have enough life insurance for my family’s needs? If I get injured, will my short-term disability cover my expenses? If I need a long-term care facility, am I covered?
Pay attention to your taxes year-round
With tax season right around the corner, you may already be worrying about your return. For many, tax time can be painful, but it does not have to be. Here’s the key — once the tax filing deadline passes, you shouldn’t stop considering how taxes impact your finances. It’s crucial to implement a tax strategy that focuses on reducing your tax burden now and in the future. Selecting tax-efficient investments, implementing tax-advantageous strategies for charitable donations and converting a traditional IRA to a Roth are all tax strategies that can make a positive impact on your overall tax bill.
Educate yourself on new retirement laws
Half the battle with creating a successful financial plan is education. Education is especially important this year because Congress just passed the spending bill that includes sweeping retirement legislation. The SECURE Act will impact the way individuals prepare and save for retirement. Set a goal to educate yourself — reading the latest financial news or book, researching how new laws will impact you, taking a class at your local community college or talking with a financial advisor are all ways to help you stick to your 2020 financial resolutions.
Skip Johnson is partner and lead advisor at the Vadnais Heights Great Waters Financial office.