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Five Financial Actions to Take Before the Ball Drops in 2020 Thumbnail

Five Financial Actions to Take Before the Ball Drops in 2020

By Bryan Lee, CFP®, MBA

If you want to put your head down and just get through the rest of December so 2020 can be over, we get it. In the midst of canceled plans, work stoppages or adjustments, complicated family decisions, and (as if that weren’t enough) financial challenges, many Americans feel like they haven’t had much control over anything this year. But there’s one area where your actions can make a big difference today and down the road: your finances. So even though there are plenty of unknowns ahead, follow through on these 5 financial actions before the ball drops on December 31st to give yourself a leg up. 

1. Make Your Budget Work for You

Even if your income hasn’t been affected by COVID-19, your spending likely has. Whenever you experience life changes, it’s wise to take another look at your budget to make sure your spending is in line with your goals and shift things around to manage your priorities. For example, this year might have shown you the importance of having a cash flow “buffer” and now you want to find new ways to reduce your fixed costs (hint: now may be a great time to refinance your mortgage). It’s also possible that many of your daily expenses have experienced some ups and downs. You might be spending less on gas and eating out, but more on groceries, masks, and online shopping, not to mention that prices on many basic items have increased. If you have experienced income changes, make sure you factor those in and adjust your spending accordingly. Go into 2021 with a thoughtful and comprehensive spending plan that helps you feel financially secure.

2. Don’t Throw Your Goals Away

Don’t be afraid to set new goals for 2021. Look at your new budget and priorities and find ways to work toward your savings goals. Get creative with things you want to accomplish next year. You may not be able to take that international trip you’ve been dreaming about, but you can get your family together for a local vacation or refocus your energy on tackling a home renovation. If you’re planning to retire, relocate, sell your business, or make any other big financial moves, identify now what changes you can make to smooth the transition. 

3. Prioritize Saving & Investing

If there’s one thing this year has taught us, it’s the importance of having liquid funds available in an emergency. A rule of thumb is to have funds set aside to cover 3-6 months of necessary living expenses or unexpected extras to avoid costly credit card debt if a crisis strikes. However, even high-yield savings and money market accounts are not paying much interest currently due to low-interest rates overall. While these savings should be easily accessible, you also want your money to be working for you. We help clients consider a variety of options depending on their situations, including traditional high-yield savings accounts, opening up a HELOC on their home (but not using it except in an emergency), and increasing their investment contributions and consider their taxable investment account as part of their liquid funds.

And while things seem uncertain, don’t shrink back from saving for the future or try to wait things out. Consistency and compound interest make all the difference in the growth of your investments. If possible, max out your contributions to your 401(k), 403(b), and/or 457(b) by the end of the year to make the most of your retirement savings. 

For 2020, you can contribute as much as $19,500 (or $26,000 if you are age 50 or older). You might also consider contributing to a Roth IRA if you are eligible, or otherwise contributing to a non-deductible IRA. In 2020, you can put up to $6,000 in any type of IRA with at least an equal amount of earned income. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. You have until April 15th, 2021 to make your 2020 IRA contribution, but doing so sooner allows for that much longer tax-advantaged growth. 

Business owners have even more investment account options to consider. Finish the year strong by investing in yourself and your future! 

4. Take Advantage of Your Employee Benefits

While every employer has different rules that apply to the benefits they offer their employees, many benefits expire or reset at the end of the year. You work hard for these perks, so be sure to use them!

Medical and Dental Benefits

At the beginning of 2020, did you have good intentions of taking care of some dental work, blood tests, or other medical procedures lingering on your to-do list? Consider taking advantage of your healthcare benefits before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments in the near future, make it a priority to set an appointment before December 31st.

Flexible Spending Account

Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year. Some FSAs may allow you to carry over $500 to the next plan year, or they may allow a grace period of up to two months and 15 days instead. Check the restrictions to see what you can use the money for, and take care of any needs your plan allows.

Sick and Vacation Time

Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.

5. Find an Advocate

If this year has taught us anything, it’s that we all need each other’s support. Before the year is over, seek out a financial professional who can take an objective look at your financial situation and help you take your finances to the next level regardless of what comes your way in the coming months and year. In a time of heightened emotions, dramatic headlines, and a temptation to panic, you need to know you have someone in your court watching out for your money and making sure you are on track to your ideal future. 

Our team at Strategic Financial Planning would love to partner with you on your financial journey. Get started now by reaching out to us at (972) 403-1234 or contact us online to set up a complimentary get-acquainted meeting so that we can see if we are a good fit! 

About Bryan

Bryan Lee is founder and President of Strategic Financial Planning, Inc., an independent, fee-only financial advisory firm. With over 27 years of industry experience, Bryan uses a unique client-first financial life planning approach and process to help his clients get the most out of life. Bryan earned his Bachelor of Business Administration in finance and MBA in international finance from the University of North Texas and is a Certified Financial Planner (CFP®) practitioner. Bryan is actively involved in his community and industry and has served on the boards of several associations and charities, including serving as President and Chairman of the Dallas/Fort Worth Chapter of the Financial Planning Association, the National Association of Personal Financial Advisors, the CITY House Board of Directors President and Chairman, Editorial Review Board of the Journal of Financial Planning, Family Services of Plano, as well as a Junior Achievement Volunteer Teacher. Bryan has been featured in local and national magazines, newspapers, and journals, including The Wall Street Journal, Investors Business Daily, CNNfn, USA Today, SmartMoney, Kiplinger’s Personal Finance, Financial Planning Magazine, The Dallas Morning News, Dow Jones Newswires, and has been recognized as a Five Star Wealth Manager and one of Dallas’s Best Financial Planners in D Magazine every year since its inception. To learn more about Bryan, connect with him on LinkedIn.