10 Steps to Financial Security in 2020
Dear Readers: It's hard to believe we're already in 2020. But rather than lament the passing of time, I like to think of a new decade as a time of renewal -- a chance to look at what you've accomplished and what you still want to achieve.
Especially when it comes to financial security, the new year is a perfect opportunity to review where you are and recommit to getting on top of your finances. Need a nudge to get going? Here are 10 steps that can help put you on the right track -- and help you follow through all year long.
1) Take stock.
You can't make meaningful financial changes in the new year unless you know where you are right now. A good place to start is with a snapshot of your overall wealth, otherwise known as your net worth. Add up your assets (what you own); then subtract your liabilities (what you owe). This will show you whether you're in the plus or the minus, and will help you plan and prioritize your spending, saving and investing. It also provides a benchmark against which you can measure your progress over the years.
Next, look at your cash flow over the past year. What came in each month? What went out? If you regularly spent more than you earned, decide what changes you'll make to turn things around.
2) Set goals, and prioritize.
What's top on your list of goals this year? Whether you want to save more, pay off debt, start a college fund or help a family member, prioritize those goals so you have a clear idea of where to put your money first. Whatever your other goals, don't neglect regular contributions to your retirement accounts.
3) Spend mindfully.
Then create a budget that will support your new goals. Itemize monthly expenses, both essential and nonessential. Make sure any top priorities, such as savings or debt reduction, are line items on your list of essentials. When you make a spending decision, make it in the context of your goals. And if you spend beyond your budget, do it with a conscious understanding of how you're going to make adjustments to your future expenditures so you don't fall into more debt than you can handle.
4) Plan for the unexpected.