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How to Stay Financially Healthy in the New Year

Dec 10, 2018 4 min read Heather R. Johnson

Key Takeaways

  • An annual checkup helps you stay on track with your financial goals.
  • Budgeting is a simple way to control spending and increase savings.
  • A retirement portfolio review will help secure your future.


You get annual medical checkups and biannual dental checkups. At work, you receive an annual performance review. Why not give your finances the same kind of "primary care?"

By performing an annual finance checkup, you can assess whether you're following your budget and making the most of your investments. If you've veered off course, you can get back on track to meet your financial, career and life goals.


When should I perform a financial checkup?

The beginning of the year is an ideal time to review your financial health. You'll get a head start on tax season and you'll have year-end pay stubs and account statements to work with. It's also a good time to set goals for the year to come.

However, if you're monitoring your retirement fund and approaching your 65th birthday, you may want to review your finances around that date. If you're getting married soon or have a baby on the way, you might want to assess your finances before these major life events.

Although individual needs may vary, your financial checkup should generally include the following components.

Analyze income and expenses

Compare 2018's after-tax income with expenses. Did you spend more than you earned?

Accounting software allows you to run profit and loss reports for easy income-expense evaluation. With a profit and loss report, you can see how much you spent on basic expenses such as rent and utilities, as well as luxury items including restaurant meals and clothing splurges. Remember, discretionary expenses can easily throw your budget off track.

Next, analyze cash flow for the year to come. Do you anticipate any atypical expenses, such as a new car or a big vacation? Do you plan to retire or take maternity leave next year? If you don't have savings to cover cash flow fluctuations, adjust spending accordingly.

Revise your budget

Creating a budget is a great way to keep spending on track and meet your savings goals for the new year. If you don't have one, you're not alone.

If you do use a budget, adjust it annually to account for any changes, such as health insurance, home insurance or income increases.

Compare your various expenses (morning lattes included) to your monthly income. If you discover you have excess income, consider meeting with a financial professional to determine the best way to put that money to work.

Review retirement savings

Review your IRA, 401(k) and other retirement plan contributions. Are you saving enough? Can you save more?

Aim to contribute at least 15% of your paycheck to your retirement funds. If that sounds like a stretch, save 10%, or as much as you can.

If you're age 50 or older, take advantage of the "catch-up" contribution. This advantage allows you to contribute up to $7,000 for 2019 to Traditional and Roth IRAs ($6,500 for 2018, contributions can be made up until April 15, 2019).

Those age 50 and over can contribute a total of $25,000 annually to their 401(k)s. The government raised the contribution limit from $18,500 to $19,000 in 2019, and folks age 50 and up can add a $6,000 catch-up contribution.

As their target retirement date nears, most investors allocate less toward stocks and a higher percentage to lower-risk vehicles such as bonds. Talk to a financial advisor to determine whether your portfolio contains the optimum mix of stocks and bonds for your age and goals.

Make a debt-free plan

The average credit card debt, per cardholder, came to $5,422 in 2017, according to Creditcards.com. With rates hovering close to 17%, that's a lot of money wasted on interest payments.

Can you set goals for 2019 to reduce credit card spending and pay down debt? You'll save hundreds to thousands of dollars annually — money you can invest and watch grow.

Review insurance policies

During your annual financial checkup, assess whether you have the right amount of insurance for your life stage.

If you've accumulated considerable assets since purchasing homeowner's insurance, you may want to discuss an upgrade with your insurance agent or broker.

If your children have graduated college or you've paid off your mortgage, you may need less life insurance. If you just had a second child, you may need more.

It's not easy these days to find better health insurance rates, but it's worth the time to review your employer-sponsored plans, individual plans or Medicare Advantage plans before the open enrollment period ends. You may find equal or better coverage at a lower rate, giving you that much more to save — or invest in your skinny vanilla latte fix.

What you can do next

Look for an accounting software to help with your income-expense evaluation. See how much you spent on basic vs. luxury expenses, then revise your budget.


Please consult your tax and legal advisors regarding your particular circumstances.




Heather R. Johnson writes about finance, small business and healthcare from Oakland, California. Her work has appeared in the San Francisco Chronicle and Houston Chronicle.


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