Personal finance

Your new year's financial check-up

4 minute read

This January, don’t just resolve to exercise more and scroll through your phone less. Complete our new year’s financial check-up to make sure you’re starting out the year on your best financial foot.  

Get a head start before the clock strikes midnight

Before you ring in January 1st, you might consider contributing any extra cash toward your retirement or savings accounts. Most savings vehicles have annual maximum contribution amounts, and if you’re able, it is a savvy move to max these out each year. Here are the annual contribution maximums for common savings vehicles:  

  • 401(k): $19,500 (1)
  • 403(b): $19,500 (1)
  • Traditional IRA: $6,000 (2)
  • Roth IRA: $6,000 (2)

Your future you will thank you.  

Locate and write down some key numbers

It is hard to manage your finances if you don’t know some key numbers that affect your portfolio. During January, it’s a good idea to login to all of your financial products, and refresh yourself on the big numbers. For example:  

  • Credit cards: APR, balances, annual fees
  • Savings accounts: APR, total saved
  • Mortgages: APR, balance remaining
  • Student loans: APR, balance remaining (Heads up: federal student loan payments were paused during 2020 and are expected to resume on February 1, 2021)
  • And for good measure, check your FICO score!  

Create a new spreadsheet to track these numbers throughout the year. Next year when you do the same thing, you can see the progress you’ve made over time.  

Re-evaluate your income level  

You've probably been told that if you want to save money and create wealth, you should cut daily expenses. For example, limit your iced coffee habit, stay in and cook more, or negotiate your Wi-Fi bill.  

While exercising self-control and common sense in your spending is prudent, the most effective lever to create wealth is by negotiating your salary. If you can negotiate even just a small raise, you’ll notice a far bigger difference in your finances than say, cutting out a few $3.00 coffees every now and again.  

Most companies hold year-end reviews. Come prepared with numbers describing your contribution to the company in the past year and industry comparisons.

Create a monthly budget with flexibility  

While it can be difficult to make a precise budget for the next 365 days, it’s a good idea to create a loose budget for each month of the upcoming year.  

Realistically, you’re not going to spend the same amount of money each month. Look ahead to big expenses that you can already forecast in a specific month, such as travel, moving, or a one-time purchase. For example, you might want your July budget to be 10% higher than your June budget to account for a wedding you plan to attend abroad.  

All said, set a budget for each month in the new year, knowing that not every month will be the same.

Finally, don’t forget to pop some champagne – cheers to a well-kept wallet!




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