2020 Is Here, But Is Your Money?

Money can be hard. It can be akin to stepping on the scale, where the hard part is facing facts squarely. Truth, however, is where the success lies, and it need not be painful. It can, in fact, be quite joyful.

2020 is here; at least in terms of planning your money goals and course corrections. If you are where you want to be financially, no need to keep on reading. If, however, there is room for improvement or if you want your financial picture to brighten in the near (or far) future, there are simple yet powerful steps you can take in 2020.

Know Your Numbers

This doesn’t need to be hard, but it does require brutal honesty. Consider looking at a snapshot of your financial life: write down your assets including your home, your retirement accounts, emergency funds and other investments. 

Next, write down your debts. Include your mortgage, credit card debts, car loans and student loans  ̶ anything and everything you owe. If Uncle Harris lent you $10,000 two years ago and you have not paid him back, write that down too.

Critical items that you may not think of regularly round out the full snapshot. Is there a 401(k) at work you have not maximized? Do you need to open an IRA?

Then, draft a budget. It need not be 100% rock-solid but having a sense of spending habits helps craft a future financial outlook. You cannot consider funneling funds into investments, for example, if you do not first understand how existing funds are being spent.

Do you like what you see? It is OK if you don't. What you have now is a snapshot that will lead to more accuracy and lots of possibilities.

Make a Plan

Setting yourself goals creates a roadmap to wealth. Goals can fill in gaps and goals can be altered, realigned and they can be attained.

Write down what you want to accomplish in one year, five years and ten years. Solid goals can be hard to set. A good way to think about them is to imagine what you’d like your financial life to be like in the future. What do you value? What do you care about? What keeps you up at night?

Make your goals specific, for example: I will pay off my credit card debt by Dec. 31, 2020 or I will buy a house before the end of 2025.

Decide which credit card to pay off and determine why you want to pay it off. It is important to examine why you’re in debt and how you plan to stay out of debt. Figure out the best plan of attack to get rid of that debt and make sure it stays gone.

Look at your numbers and your goals every month. Did you achieve a goal? You must celebrate these successes. Did you stumble?  You must regroup and try again. 

Finally, update your goals each year to keep them relevant to you.

Automate Your Savings and Investments

It is an old saw, "pay yourself first," and it can be hard, even brutal, and is completely avoidable; but it is the secret sauce to financial planning.

You must pay yourself something and do so automatically. You can determine the amount, but generally speaking, 10 to 20% of one's income is recommended. A monthly, automatic contribution such as this will grow your wealth.

Over time, gradually increase that amount to increase your wealth.

For a similar purpose, set up automatic contributions to an emergency fund and automate payments to your 401(k) or IRA.

Spread these automatic payments across your retirement, emergency fund and non-retirement investments.

Doing so allows you to relax, as you know that the hard work and money you earn from these payments is growing beyond its initial value. These three steps are not just a comfort; they present a quiet and powerful method for potentially improving your 2020 financial goals.

Disclosure:The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please consult your financial advisor regarding your specific situation.

Teresa R. Sanders, MBA, RICP, CFP, is a partner at Aspen Wealth Management, Inc.