How To Plan Out Your Financial Check-Ins for the Year
This year may be the year of getting back on track financially for many Americans. Fidelity Investments’ 2021 New Year Financial Resolutions Study found that more than two-thirds of adults surveyed experienced a financial setback in 2020. However, 72% of respondents said they expect to be in a better financial position in 2021.
If you hope to bounce back financially this year, having a plan can help. Sure, you can make a broad resolution to spend less and save more. But that can feel overwhelming. “I believe in breaking financial goals up into smaller, more manageable chunks rather than a substantial year-long goal,” said Forrest McCall, owner of Don’t Work Another Day.
With that in mind, consider checking in on various aspects of your finances each month. Then you won’t feel overwhelmed.
January Check-In: Do a Financial Audit
Start by assessing your current financial situation. “I think conducting a financial audit acts as a great first event of the year for people making resolutions,” said Riley Adams, a financial analyst, certified public accountant and founder of Young and the Invested.
Log into all of your accounts or gather statements from 2020. Get a sense of how much money you have coming in, how much you’re spending, how much you have in savings, how much you have invested, how much you owe and what fees you’re paying on those accounts. Knowing where you stand financially can help you map out what steps to take to improve your situation.
February Check-In: Make a Budget
The Fidelity Investments study found that more than 1 in 5 respondents who said they were in a better position this year than last year attributed their success to budgeting. Review your bank account (or credit card accounts) to see how much you spent on essential versus nonessential expenses in 2020. You might find that there’s more room in your budget to pay off debt or boost savings than you thought — or that you need to eliminate unnecessary spending to have more cash for essential expenses.
There are a variety of budgeting methods you can use. The key is to create a plan for your money and stick to it.
March Check-In: Get Ready for Tax Season
Get organized in March to avoid a last-minute rush to meet the tax-filing deadline. You should have already received tax forms such as a W-2 or 1099. Also, gather receipts and any other documents you need to file your tax return. “The more organized you can make this, the better chance you will get every deduction and credit that you qualify for,” said Nate Miller, president of Miller Retirement Group.
This year, the tax-filing deadline was extended to May 17, but getting it off your plate early never hurts.
April Check-In: Build — or Boost — an Emergency Fund
If you got a tax refund, use it to get your emergency savings back on track, said debt relief attorney Leslie Tayne. Open a high-yield savings account and deposit your refund to start building enough cash reserves to cover at least three to six months’ worth of expenses.
If you didn’t get a refund, review your budget to see where you can cut back to save more. “If you have direct deposited paychecks, consider asking your employer if you can set a portion of your paychecks to go directly into savings,” Tayne said. “If this isn’t an option, establish automatic transfers at your bank.”
May Check-In: Look For New Sources of Income
The Fidelity Investments study found that two-thirds of respondents said they plan to find new ways to make money this year. Take advantage of spring cleaning to sell items you no longer need on Craigslist or eBay, at a yard sale or at a consignment store. Look for a side hustle to supplement your income. Or learn new skills to boost your career and income.
June Check-In: Evaluate Bank Fees and Interest Rates
If your bank charges you a monthly fee just for having an account, Tayne recommends switching to an institution with free checking. On the flip side, if you have a savings account with a low interest rate, look for a high-yield savings account at an online bank, credit union or community bank, which tend to offer higher rates.
July Check-In: Budget For Back-to-School Purchases
“Many families will spend hundreds per year on back-to-school supplies, so you’ll want to ensure this is in your July or August budget,” McCall said. Take inventory of the supplies your kids still have and clothes that fit, then make a list of what you need to buy and how much you expect back-to-school shopping to cost. Aim to set aside enough over the next couple of months so you don’t have to rely on credit to make purchases.
August Check-In: Prepare For Holiday Spending
You can avoid going into debt this holiday season by starting to save now. Whitney Hansen, money coach and host of The Money Nerds podcast, recommends dividing the amount you spent on the holidays in 2020 by the number of weeks until the holidays begin this year to figure out how much to set aside each month. “I like to set up automatic transfers every week from my checking to your savings to help me reach this goal and not carry holiday debt into the upcoming year,” she said.
September Check-In: Make Sure You Have Enough Life Insurance
Considering that September is Life Insurance Awareness Month, it’s a good time to make sure you have enough coverage to protect those who rely on you for financial support. “A good rule of thumb is 10 times your salary,” Miller said. “So if you make $100,000 per year, you need a $1 million policy.”
A term life insurance policy can be an affordable way to get the coverage you need. It will be in force for a certain period — 10,15, 20 or 30 years — and will cost significantly less than a permanent life insurance policy.
For example, the average monthly premium for a 20-year, $500,000 term policy is $24.48 for a healthy 35-year-old woman and $29.09 for a healthy 35-year-old man, according to Policygenius.
October Check-In: Review Beneficiaries on Your Financial Accounts
Review the beneficiaries you’ve named on financial accounts such as life insurance policies and retirement accounts, said R.J. Weiss, a certified financial planner professional and founder of The Ways to Wealth. This is especially important if you’ve gotten married, divorced or have had children recently. You want to make sure the right people will receive the proceeds from those accounts if something happens to you. “From there, set up an annual reminder, such as a calendar alert, to run through your accounts on a regular basis,” Weiss said.
November Check-In: Check Up on Your Healthcare Benefits
November typically marks the start of open enrollment season for the health insurance marketplace and for workplace health insurance plans. Take this opportunity to review your health insurance options to see if there is one that is more affordable. Opting for a high-deductible plan with a low premium could make sense if you’re in good health.
December Check-In: Increase Retirement Savings
If you get a raise or a year-end bonus, use that extra income to boost your retirement savings. Because you’re already used to living on your current paycheck, setting aside the amount of your raise — or at least part of it — each month is a pain-free way to save more for retirement. If you do this with each raise, you might be surprised at how quickly your retirement account balance will grow.
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