Preparing Financially for 2020
Something interesting happens once December hits, and no, I’m not talking about holiday decorations. It’s the time when most people start planning their New Year’s resolutions.
Do you want to feel financially sound, but don't know where to start? You're in luck: if you’re not happy with the state of your finances, now is the perfect time to begin setting some new goals for financial management. This article will review some simple steps you can take to start planning for financial success in 2020.
How to Start Preparing Financially for 2020
Most people would like to improve their financial situation but aren’t exactly sure how to start. Listed below are five ways you can begin preparing financially for 2020.
1. Review Your Spending
If you’re struggling financially, the best place to start is by taking a good, hard look at your budget. If you don’t already have a budget in place, there are plenty of free apps that will help you get started.
For the first couple of months, focus on tracking your spending and figuring out where your money is going. You can do this by saving your receipts and monitoring your bank and credit card statements.
Look for the most common areas where you’re spending your money. These categories will vary for everyone, but the most common living expenses tend being mortgage or rent, utilities, eating out and entertainment.
Once you have an idea on where your money is going, you need to start looking for ways to cut your expenses. Are there any areas where you’re overspending? For instance, you probably can’t cut out your mortgage, but you can cut down on how often you go to restaurants.
2. Max Out Your Retirement Contributions
There is a limit to how much you can contribute to your retirement savings every year. This number will vary slightly, depending on your age and what kind of account you have.
There are a couple of reasons why it’s a good idea to max out your retirement contributions, or at least get as close as you can. First, there are tax advantages to doing so, assuming you qualify for the Retirement Savings Contribution Credit.
And second, you can’t make up for missed retirement contributions. Every dollar that you put off saving for retirement is money that can’t grow in the market.
3. Choose a Debt Reduction Plan
It’s easy to fall into a cycle of debt where you’re earning just money to pay off your credit cards, only to rack your balances back up again. If you have any high-interest credit card debt, then combining and paying off that debt is one of the best things you can do for yourself in 2020.
And while it's easy to get into debt, it’s much harder to break free. But with the right plan in place, you can pay off your debt and put yourself in a better financial position.
One debt reduction plan you might consider is the debt snowball method. This method first became popular thanks to financial expert Dave Ramsey.
To begin, you’ll make a list of all your debts, starting with the smallest debt and ending with the largest. You’ll pay off your smallest debt first, and once that’s gone, you’ll move onto the second largest.
You may end up paying more money in interest with the debt snowball method. But by focusing on small wins, you’ll make it easier for yourself to stick with it. For many people, the debt snowball method is a more motivating and sustainable way to get out of debt. You can also consolidate your debt using one of our debt consolidation personal loan options.
4. Start Tax Season Preparation
If you want to set yourself up for success in 2020, start preparing for tax season now. I know, watching Christmas movies and drinking hot chocolate sounds like a lot more fun. But this is worth it!
You’ll thank yourself when you’re not struggling to get everything done in early April. Plus, getting the process started now means you might receive an earlier refund.
To get started, gather your receipts, proof of income and start figuring out your deductions. If you’re feeling really ambitious, you can even schedule a consultation with an accountant.
5. Set Clear, Financial Goals for the Upcoming Year
And finally, you’ll want to map out your financial goals for the upcoming year. Do you want to improve your credit, finance a vacation, or purchase a home in 2020? Setting clear goals is the best way to make sure that you’ll continue making progress.
Of course, most people set goals around the New Year, but few follow through on them. Here are a few ways you can become the exception:
Set Goals That Matter
If you want to find success with your financial goals, then you need to figure out what matters most. Setting meaningful goals will help you push through when things get hard.
Think Short-term and Long-term Goals
It’s a good idea to set both short-term and long-term goals. A short-term goal is something you can reach within a relatively short time period.
A good short-term goal could be creating an emergency fund, paying off a smaller bill, or making minor home improvements. By comparison, a long-term goal would be something like saving for retirement or your children’s college savings fund.
Use SMART Goals
SMART goals are Specific, Measurable, Achievable, Relevant and Timely. By having SMART goals in place, you’ll be able to come up with a plan for meeting your financial goals. And you’ll also have a measuring stick for whether or not you’re making progress.
The Bottom Line
Now is the best time of year to start preparing financially for 2020. With the right mindset, planning, and tools, you can set yourself up for success in the New Year.
If you’re looking for ways to pay down your debt in 2020, Rocket Loans® can help. Taking out a personal loan is a great way to consolidate your high-interest credit card debt. Getting prequalified online is easy and it won’t impact your credit score.
Table of Contents
Applying for a Personal Loan While Self-Employed
Need a mortgage or personal loan while self-employed? Find out from our guide what’s different for self-employed workers when acquiring personal loans.