The start of a new year is a great time to reflect on the previous year and establish goals for the year ahead. Since many of our finances are structured on an annual timeline, like yearly contributions to a retirement account, this is a great time to put goals in place.
The more specific your goal, the more likely you are to achieve it, but below are some common financial goals to provide a starting point.
Goal: Max out your Retirement Accounts
For 2019 the annual contribution for 401(k)’s, 403(b)’s, and most 457 plans have increased to $19,000 (up from $18,500 in 2018) and Traditional and Roth IRA’s have also seen a $500 increase, raising the annual limit to $6,000 (up from $5,500 in 2018) (1). This is great news for those who are already maxing out these accounts, and for those who are trying to catch up before retirement. The more money you can sock away in pre-retirement years, the better these accounts will look when you need them.
For those that have maxing out their Traditional IRA or Roth as a goal and were already struggling to hit the limit, don’t let this $500 increase be discouraging. If you can increase your contribution to $6,000, this $500 bump will look great in your account by the time you retire! That extra $500 invested now earning a 7% annual interest turns into over $5,000 in 35 years (2). If you are able to max out your IRA consistently, you are potentially increasing your future balance by tens of thousands.
Goal: Get out of debt
A new year, a new beginning...not for all that credit card debt though. Unfortunately, any debt you have will follow you into 2019 and continue to do so until you pay it off. If you have already been working hard at paying off debt, now’s the time to add up all your hard work from 2018. See how much you paid off, give yourself a pat on the back (it’s free) and set a goal to pay off more than that for 2019. This won’t work if you’re continuously adding to your existing debt though, so take a look at your spending habits in 2018 and see if there are any problem areas you can address, and leave in 2018.
Goal: Get a raise
The beginning of the year is a great time to address your performance from the previous year. The cost of living increases by about 2% a year, so it’s not unreasonable to ask for a raise to compensate for inflation, especially if you haven’t had one in a few years. Don’t go in with that as your only argument, take some time to reflect on your accomplishments over the last year, how you have grown, and your value to the company. Ask to sit down with your employer and go over your strengths, and ask if there are areas you could improve in for the coming year. You can be modest as ask for a 2-5% raise to keep up with inflation, or if you find you’re being undervalued- ask for what you’re worth!
Glassdoor has a “Know Your Worth” calculator, which is made for this exact purpose. Bring a printout of your results, do your homework, and be confident.
Goal: Save more
It’s likely you have a specific goal you’re saving for, whether it’s a new laptop or the down payment on your first home, and the start of the year is the perfect time to make those goals more concrete. If you have a specific amount you want to have saved, do a little number crunching and see the monthly amount you’ll need to put away to get there.
To make the most out of your savings account, make sure you’re taking advantage of the many online, high-yield savings accounts out there. Not only will it be harder to dip into these accounts if they aren’t in the same vicinity as your checking account, but the current interest rates you can get will give you more bang for your buck. Synchrony and Ally are both offering 2% APY or higher, are free to open, don’t have a minimum requirement, and have no monthly service fees.
Automating your savings is another way to ensure you save more. If you have a specific goal and know how much you need to save to get there, set up an automatic and recurring deposit from your checking account to your savings account to occur after you get paid. Human beings are natural procrastinators, so putting your savings on auto-pilot is good protection from future laziness, and from spending the money you had designated for saving.
Goal: Get insured
If you have started a family or bought a house recently, you may be in a new phase of life where other people are dependent on your income. If you do not already have life insurance, the start of the year is a good time to get all of your ducks in a row. The cost of life insurance has a large range that factors in your age, gender, health, and the amount of death benefit your beneficiaries would receive should something happen to you. Some term policies could be as little as $10 per month, where whole life insurance could be in the hundreds. When running quotes for my clients, we establish the type of protection you need, what you can afford, and run dozens of quotes from various companies to find a good fit for you and your family.
Establishing your goals is easier than maintaining them, but the nice thing about financial goals is you can easily tell when you’re getting off track. Remember to revisit your goals regularly, and acknowledge both your achievements and shortcomings. Seeing your savings grow, higher interest being credited, and establishing protection for your loved ones are all things to be proud of.
I hope this short list of potential goals was helpful and encourages a year of growing accounts! if you have questions or need guidance on life insurance or opening an IRA, please don’t hesitate to reach out.
*No compensation is received from the recommendations or linked companies in this article.