Our Month-by-Month Guide to Having Your Best Financial Year Ever
Save more, slash debt, and spend better. Experts break down an easy, month-by-month money plan for 2020 (and beyond!).
January: Tackle high-interest debt.
Paying interest is like forking over money for nothing, so your first job is to get a handle on loan repayments. For each of your debts, jot down the interest rate, the minimum monthly payment, and how much you owe, says Shannon McLay, founder and CEO of the Financial Gym in New York City. Then try what’s known as the avalanche method: Pay the minimum on all your debts each month and put any extra money toward the loan with the highest interest rate. If you get a windfall—like a bonus or a tax refund—put it toward that top debt as well. Once you pay it off, move to the loan with the second-highest interest rate, and so on.
RELATED: How to Get Out of Credit Card Debt
February: Prep for a smoother tax season.
Prevent a last-minute document dive when filing your taxes. This month, as tax documents come in (via email or snail mail), store them in a folder along with your receipts for deductible expenses, says Lisa Greene-Lewis, CPA, a tax expert for TurboTax. Think about the previous year: Did you have any big life moments—you bought a house, say—that might affect what you’ll owe? Make note of them. And as basic as it sounds, triple-check all personal information that you’ll put on your tax forms or give to your accountant. One of the most common filing errors taxpayers make is entering incorrect Social Security numbers for their spouses or children—and these numbers are critical for receiving valuable tax benefits.
March: Build emergency savings.
You don’t want to go to bed worried that a blown-out water heater could be your undoing. Yet a recent Bankrate survey found that only about 40 percent of Americans would be able to cover an unexpected $1,000 expense. “The point of money is to feel secure,” says Suze Orman, host of the podcast Women & Money. “The goal is to have eight months’ worth of living expenses in savings.” You can pace yourself, of course—Orman advises socking the money away over 12 to 64 months. “Stick to a plan that gets you to save a little more than what feels easy,” she says. Set up automatic deposits—right out of your paycheck—to an interest-yielding account. Name the account something like Save Yourself: Experts say personalizing an account with a name that calls out its purpose can motivate you to keep saving.
April: Tidy up financial documents.
Sure, disorganization can cost you time. But it can also cost you money, if you have to replace an original document, like the title to your car. Gather important papers and sort them by type and date, says Julie Morgenstern, author of Organizing from the Inside Out ($14; amazon.com). Store them in a document box near where you pay your bills: “It’s easier to find and file information as you use it,” she notes. Also think about the information you’re constantly looking for, she says. Scan the relevant documents and save them in a digital file— then stand in awe of yourself when you find your most recent W-2 with a few swipes of your phone rather than the usual ransacking of your home.
May: Maximize your investments.
With tax stress out of the way—and possibly even a little refund money to play with—give some thought to your retirement account. Aim to contribute 15 percent of your income (take advantage of employer matching, if your company offers it). Make sure the investment mix still suits your long-term goals. “Your 401(k) plan likely has an online tool that can help you realign your balances in a way that’s right for you, based on your age and when you plan to retire,” says Katie Taylor, vice president of thought leadership at Fidelity Investments.
June: Earn more on your savings.
You’d never stockpile cash under a mattress. Stashing money in an account that barely earns interest isn’t much better. Nevertheless, nearly half of women surveyed in a recent Fidelity study said they keep $20,000 or more in a low-interest account. Let this be the month you calculate what your savings account yields every year. Look into low-fee, high-interest accounts offered by online banks; many have rates around 2 percent.
July: Check your credit report.
It’s easier to secure a loan for a big-ticket item, like a car or house, when you have good credit. Go to annualcreditreport.com and order a free report from Equifax, Experian, or TransUnion. “Rather than getting them all at once, request one report from a different bureau every four months to keep tabs on things throughout the year,” says McLay. Read your payment history carefully to make sure it’s correct—and report any activity you don’t recognize. If you notice recurring suspicious activity, you might want to freeze your credit. And keep in mind that child identify theft can go undetected for years. To help prevent it, consider freezing your kids’ credit.
August: Save on school costs.
Your child doesn’t need a raft of new school supplies when you have a junk drawer full of pencils, pens, and notebooks. Be resourceful and reuse, says Kelsey Sheehy, a personal finance expert at NerdWallet. She also suggests teaming up with other parents to buy supplies in bulk. If you go back-to-school shopping online, try a browser extension like Honey, which automatically applies the latest coupons or promo codes. And if your kid is applying to college—deep breaths!—gather the paperwork you need for the Free Application for Federal Student Aid now so you’re ready when the application becomes available October 1. Aim to submit the FAFSA by November 1, since need-based aid is first come, first served.
September: Prioritize advance-planning documents.
Not to be doom and gloom, but you need a will and other end-of-life documents. “People don’t like thinking about death,” says Orman, who developed the Must-Have Documents program ($63; suzeorman.com/realsimple) with her estate attorney. “Everyone assumes they only need a will, but that just says where your assets will go when you die,” she points out. You also need a revocable trust with an incapacity clause (which appoints someone to handle certain assets for you if you’re unable); an advance directive (which states what medical care you want in an emergency); a durable power of attorney for health care (which names a trusted person to make medical decisions for you); and a durable financial power of attorney (which names someone to make financial decisions for you). Once you have these documents in place, hold a family meeting to inform loved ones of your plans.
October: Snip bills and subscriptions.
You have a Spotify account and so does your husband...and so does your kid. Get rid of redundancies and recurring payments and it’s like finding free money. Print out a few months of bank statements and highlight your regular payments, or use an app like Clarity Money, which breaks down spending. You can also try bargaining with your providers, says McLay: For cable, cellphone, and internet service, look into the introductory plans competitors offer and ask your provider to match the lowest one. Or download the Trim app, which negotiates lower rates with providers on your behalf. (It’s free to use, but you’ll split the savings with Trim.)
November: Reduce health costs.
Create a binder for your medical forms, or go virtual with Apple’s Health app, which has a Health Records feature. This might help you avoid costly diagnostic testing, since many diagnoses can be made based just on your medical history, says Carolyn McClanahan, a doctor turned financial adviser. Save money at the pharmacy too: Ask how much a drug would cost if you paid without going through insurance and you may get a lower price, says McClanahan. Download GoodRx, a free app that compares drug costs and offers scannable coupons. And remember to use up flexible spending account funds, which usually expire on December 31. Not sure what’s covered? Go to fsastore.com for eligible products.
December: Have a money conversation.
Death. Politics. Religion. Forty-four percent of Americans find it easier to talk about these subjects than to discuss their finances, according to a 2014 Wells Fargo survey. Break the taboo by holding a quick weekly check-in with your partner, says Cameron Huddleston, a personal finance journalist. Discuss what you value most—that can help you get on the same page and create shared financial goals, says Kathleen Burns Kingsbury, a wealth psychology expert and host of the podcast Breaking Money Silence. Then look at your spending over the past month or two and see if it aligns with your values. For example, if quality family time is important to you but most of your extra money goes toward material items, you may want to reevaluate your budget.