4 End-Of-Year Financial Strategies For Success
As 2019 winds down and the holidays quickly approach, most of us are probably paying far more attention to our expenses. Whether it’s taking advantage of a Black-Friday sale or finding Cyber-deals online, our minds are seamlessly gravitating toward a higher state of cost-consciousness. So it’s extremely important while money is at the forefront of our minds, to not put 100% of our energy into spending with no return on our investment. So listed below are a few simple steps that can be taken before January 1st to set yourself up for financial success in 2020.
#1) Create A Holiday Budget & Isolate Shopping Funds
It’s been reported that nearly half of all Americans feel pressured to overspend on holiday gifts according to fortune.com. So it’s no wonder many people seem to find themselves in excessive consumer debt and financial turmoil shortly after the holidays are over. With this in mind, one of the simplest strategies to help avoid this predicament is to simply create a budget for your holiday shopping. Additionally, be sure to keep all related funds set aside in a separate account to help keep yourself on track with shopping costs. Also, coming up with a fixed spending amount per person can potentially go a long way in holding yourself accountable for not overspending.
#2) Increase & Rebalance Your Investment Portfolio
End of the year is normally a great time to thoroughly review your investment performance, particularly your retirement accounts (i.e. 401k’s, IRA’s, etc). If you happen to already be saving regularly through automatic contribution amounts, or dollar-cost averaging, try increasing your monthly savings amount/percentage. Additionally, you should strongly consider taking advantage of the portfolio rebalancing option on your investment account. This strategy allows you to reset your investment allocations back to their original targets, which is normally suggested at least annually according to investopedia.com.
#3) Make An Extra Principal Payment On Your Outstanding Debt(s)
While many people may not realize it, aggressively paying down debt saves you both time and money in the long run. This is especially true when it comes to paying off long term debts such as mortgages, student loans, and auto loans. For example, it’s been estimated that 30-year mortgage borrowers end up paying nearly half of their total interest costs in the first 10 years of the loan. This is primarily due to the power of compounding interest and the fact that the interest rate on such a loan normally gets applied to a higher principal balance during the early years. Therefore, making just one extra mortgage payment per year can potentially end up saving you thousands of dollars and several years of time. This strategy also allows you to build up equity in your home faster than you would otherwise.
#4) Create/Update Your Living Will & Estate Plan
Nearly everyone has heard this phrase at some point in their life: “a failure to plan means planning to fail”. And because this season can so easily result in misplaced financial priorities, there is no better time of year to start planning out your estate. Estate planning has become particularly problematic among communities of color, with an estimated 70% of African-Americans have no will or estate plan in place. Without this necessary step it becomes nearly impossible to transfer wealth to future generations depleting one’s estate and going through an extensive court process. Therefore, one of the best financial moves you can make before the year ends is to start the process of creating your own estate plan with the help of an attorney. Also, don’t forget to update your beneficiary information on any open accounts as needed.
Following these strategies are just a few simple steps we can all take to get our finances on track before the year ends. However, it must be noted that these actions are not by any means the finish line when it comes to achieving success. Rather these strategies are a starting point for becoming intentional and deliberate about our financial progress. Ultimately, you must continue to put the work in not only at the end of the year but all throughout the year as well.[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]
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