I love the clean slate the New Year offers. None of us have messed up yet in 2019!Â What a great feeling. But how do you keep that winning streak going?Â For me, the answer is setting goals, tracking progress and making adjustments as necessary.
Itâs also important to remember, you donât have to fix everything in your financial life at once. You can break the job up. Why not tackle one financial task for every month of 2019? By year end, youâll be that much closer to where you want to be financially.
January — Year in Review
As the saying goes, you canât know where youâre going until you know where youâve been. Use this month to figure out what your financial life looked like over the past year. I always start with my income and expenses (cash flow) and net worth. I love having a full year of detailed, color-coded spreadsheets to review with Ben. They provide concrete data to help us determine where we want or need to adjust.
Donât have carefully tracked data or spreadsheets? Pull out your credit card and bank statements and look at your total spending. You may not get a lot of detailed data, but you can compare your total expenses against your net income from on your pay stubs or business profit & loss. You can then create a spending system based on intentionality and savings using the three-bucket system. If you’re feeling really motivated, sign up for a service like YNAB or Mint to start tracking your expenses in detail.
Many advisors, myself included, argue that net worth is one of the single most important indicators of financial health. If this isnât something that you keep track of on a monthly basis, take the month to check in on it. It consists of a simple analysis of your assets and your liabilities. Iâve created a spreadsheet you can use to help you out with your calculation.
February — Get SMART
After reviewing 2018, youâll have a better idea of any areas where there are gaps between where you wanted to go and where you ended up. You can use those gaps to set goals for 2019. Iâm a huge fan of SMART goals. These goals are Specific Measurable Achievable Realistic and Time-based. Itâs not enough to say, I want to save more money this year. Itâs better to say I want to max out my Roth IRA by the end of 2019. That gives you a specific amount, with a definitive time frame from which you can track your progress. Research has shown it also helps to write down your goals and to approach them one task at a time. Once you achieve one, check it off and start another.
March — Tax Review
I know, I know, many people think of April as tax month. But leaving your tax return until the last minute only increases your chances of making a mistake or missing a deduction. So do yourself or your tax preparer a favor and get your tax documents together in March. The earlier you have the return done the more time you have to make any adjustments that you find necessary.
April — HSA/IRA Review
Once youâve done a preliminary estimate of your taxes, you may find that you owe money. Itâs not too late, though, to reduce your tax liability. You can fund a tax-deferred savings vehicle like an HSA, an IRA or, if youâre self-employed, a SEP-IRA right up until the tax filing date of April 15, 2019 and still subtract your contributions from last yearâs income. Just donât wait until after the 15th, because then your contributions can only count against 2019 income.
May — Give Yourself a Break
Tax season is stressful for a lot of people. (I still have plenty of hangover from my days heading up my firmâs tax preparation program.) So use this month to treat yourself. Good financial planning helps you keep one foot in the present and one foot in the future. Both are important.
You can start by taking stock of one thing that you really enjoy in life this month. Maybe itâs a massage or a night out on the town. Keep in mind, this doesnât need to be extravagant. Think about the need this item or experience fills for you. Then, consider whether thereâs a cheaper way to meet that need. For example, say you love having dinner out with friends. Is it because of the food?Â Or more likely because of the company?Â Maybe you can find a park, grab some take out and a cheap bottle of wine and enjoy yourself without spending a ton of money.
June — Goal Check In
Now youâre halfway through the year. How are you doing? Youâve set some SMART goals for yourself. Are you meeting them? How are your buckets? Use this month to check in on your progress. Again, write down these thoughts so you can go back to them when you come to the end of the year.
July — Insurance Review
After a couple of months of laid-back tasks, itâs time again to tackle a bigger one: insurance. The 2017 Nobel Prize Winner in Economics Robert Thaler notes that âself-control issues are most likely to arise when choices and their consequences are separated in time.â In other words, though you pay for your insurance every month, you may not use it for years or ever. That makes it hard to focus on how important insurance is most of the time. But you canât wait until you need it to buy it. Then itâs too late. So recognize this about yourself and make sure you have proper coverage now. While youâre at it make sure that your important insurance documents and contacts in an easily accessible place in case of emergency. An insurance organizer is a great start.
August — Net Worth Analysis
Didnât we already do this in January?Â Yes we did. But itâs important to check in regularly on your financial good health. Compare your net worth this month to where it was in January to see if the number has gone up or down. Think about the factors that may be moving the number. Also give yourself a break — itâs August. Take a breather from your financial planning tasks or catch up on previous ones.
September — Estate Planning Preparation
Estate planning is another really hard task — and like insurance, itâs made even harder by the fact that it takes so long for your efforts to pay off (and, almost by definition, they pay off for other people, not you). Still, the stakes couldnât be higher for your family, your loved ones and your peace of mind. So recognize that itâs easy to procrastinate and give yourself some flexibility around making good decisions. You can set up guardrails to keep you on track. Use this month as a reminder to start on your estate planning, if you havenât. If you have, verify your estate planning documents are secure and accessible.
October — Goal Check In
Donât wait until December to do your last goal check in. By then, if youâre off track you wonât have enough time to fix the problem. Following up in October gives you the opportunity to do one last assessment and see what changes need to be made, if any, in order to get where you want to be by the end of the year.
November â Open Enrollment Time
Around this time of year, youâll get an email from human resources letting you know that you have the opportunity to update your workplace benefits. Luckily youâve started your insurance review in April, and you have a good sense of whether your coverage is adequate. You can now verify what youâve found and use any analysis to update or adjust your coverage as needed.
December â End of the Year Planning
What, another year over? As I get older, the years fly by faster, and Iâm sure 2019 will be the same. So donât miss this one last opportunity to meet your 2019 goals. Youâll also may want to do a tax projection in order to determine any last-minuteÂ charitable and work-place retirement plan contributions. So before you slip into your holiday lull, make sure to get your last-minute planning done.
I hope you found these checkpoints helpful. Feel free to switch the order or substitute other types of planning opportunities that seem more relevant to you. The goal is to create markers that keep you motivated for consistent, actionable progress. Help yourself out by writing them down and setting calendar reminders for yourself to help create a habit.