Big, sweeping New Year’s resolutions can be tough to stick to.
When we set the bar too high or make unrealistic goals, we inevitably blow it or become overwhelmed. Smaller goals, however, can be much easier to reach.
To set you up for success, we’ve broken down some smaller financial goals for you to work on month-by-month this year. While you may not become a millionaire overnight, you will make significant headway on the journey to a better financial future.
January: Identify Your Financial Goals
This may seem obvious, but it should be the first step to any plan. Figuring out what you want when it comes to money can be an interesting exercise. You probably have short-range goals that you want to accomplish in the next month or year. For example, if you know you have to replace that hot water tank soon, or you have a car that needs to be repaired, you may want to save up for these types of short-range expenses that may cost you a lot of money out-of-pocket very soon.
Then you’ll have more medium-range goals like saving up for a new car or setting up a college fund for your kids. Those are some goals that you can begin thinking about and planning for now. Of course, you have long-range goals such as retirement. You might want to purchase a new home or travel more during this time of your life. I always encourage folks to really take a hard look at the end game. What is it that you want to accomplish at those different stages of your life? Once you have identified those goals and know what you’re working toward, they will be much easier to accomplish.
February: Prepare for Tax Season
Many people scramble at the last minute to find all their documents when filing their taxes. Instead, this month, as your tax documents come in (via email or snail mail), store them in a folder along with your receipts for deductible expenses. Think about any big life changes that happened to you in the last year. Did you buy a house or lose your job—something that might affect what you’ll owe? Make note of them. And as basic as it sounds, triple-check all personal information that you’ll put on your tax forms or give to your accountant. One of the most common filing errors taxpayers make is entering incorrect Social Security numbers for their spouses or children—and these numbers are critical for receiving valuable tax benefits.
March: Create an Emergency Fund
Establishing an emergency fund is key to your financial well-being. You don’t want to go to bed worried that any sudden home repair could be your undoing. Yet a recent survey found that only about 40 percent of Americans would be able to cover an unexpected $1,000 expense.
Without an emergency fund, you can end up turning to things like credit cards because you don’t have enough money on hand to be able to do things like fix the hot water tank or get the car repaired. Having that emergency fund allows you to buffer or cushion your normal household expenses when those things come up, and only use this bucket of money for truly unexpected and necessary expenses. To make it easier, you can pace yourself by starting out with a small amount and then socking the money away over time.
If you dipped into your emergency savings last year but are on better financial footing going into next year, focus on replenishing those savings in case you need them again.
April: Organize Your Important Documents
Keep your important documents organized to ensure that your wishes are carried out if something should happen to you. It’s also important that you make a copy of all these documents—a trust, wills, beneficiary documents, etc.—and keep them in a safe place where your family can easily find them.
Disorganization can cost you time, but it can also cost you money—if you have to replace an original document like the title to your car. Save time and money by gathering important papers and sorting them by type and date. Then store them in a document box near where you pay your bills. Or scan the relevant documents and save them in a digital file—then be super proud of yourself when you find your most recent W-2 with a few swipes of your phone rather than the usual ransacking of your home.
May: Maximize your Thrift Savings Plan (TSP)
With tax stress out of the way—and possibly even a little refund money to play with—give some thought to your Thrift Savings Plan (TSP). Make sure the investment mix still suits your long-term goals. You want to make sure that if you’re a FERS employee, that you’re putting in at least enough to get all the free money out of TSP, which is the FERS match. To do that, FERS employees must put in 5% of their pay, and their agencies end up putting in 5% of their pay as well. Every single pay period, you’re going to get that free money as long as you’ve spread out your contributions over all pay periods in the year.
Regardless if you’re a CSRS or FERS employee, can you challenge yourself to contribute more to the TSP? Is that 1% more? How can you max out the TSP at $23,000 per year? How can you get the full catch-up contribution of $7,500 per year (available in the year you turn 50)? Wherever you’re at today, how can you step up your game just a little bit and make that work in your budget?
June: Tackle Debt
When it comes to debt, it can be one of those overwhelming, frustrating, and kind of embarrassing parts of your life. You end up racking up debt and then have to figure out how to pay it all off. The first step in tackling your debts is to identify what they are. That’s the dollar amount that you owe, the interest rate that you’re paying, and the minimum monthly payments. That’s the starting point. What’s the bare minimum that each of these companies need to be satisfied each month?
Paying interest is like forking over money for nothing, so your first job is to get a handle on loan repayments. The next step is the idea of the “snowball plan,” and this is a quite common financial planning theme when it comes to tackling debt. It’s the idea that you pay off the highest interest debt first and work your way down the list. Maybe that’s a credit card that has 20% interest rate. You pay that down first, and when you’re done paying that, the money that you were putting towards that particular debt, you snowball that payment into the next highest interest rate obligation. If you have another credit card that’s at 18% interest, you’re just going to continue to roll extra money into that payment until eventually, all of that discretionary income is just attacking and crushing the debt that you currently have.
Of course, it goes without saying that part of tackling your debt is not accumulating more debt. So, don’t use those credit cards unless it’s absolutely necessary.
July: Check Your Credit Report
It’s easier to secure a loan for a big-ticket item, like a car or house, when you have good credit. You can leverage great scores into great deals — on loans, credit cards, insurance premiums, apartments, and cell phone plans. Bad scores can hammer you into missing out or paying more. In fact, the lifetime cost of higher interest rates from bad or mediocre credit can exceed six figures.
Since credit scores have become such an integral part of our financial lives, it pays to keep track of yours and understand how your actions affect the numbers. You can build, defend, and take advantage of great credit regardless of your age or income. Order a free report from Equifax, Experian, or TransUnion. Instead of getting them all at once, request one report from a different bureau every four months to keep tabs on things throughout the year.
Read your payment history carefully to make sure it’s correct—and report any activity you don’t recognize. If you notice recurring suspicious activity, you might want to freeze your credit.
August: Talk to Your Spouse
Death. Politics. Religion. Many Americans find it easier to talk about these subjects than to discuss their finances. Don’t be afraid to talk about money with your spouse; instead, hold a quick weekly check-in with your partner. Discuss what you value most—that can help you create shared financial goals. Then look at your spending over the past month or two and see if it aligns with your goals.
Make sure that your spouse or significant other is involved with any financial decisions. It’s critical that you’re both on the same page. There is one thing that I really took away from my time in the Marine Corps, and that is ‘perspective’. What you see depends on where you sit. That happens in an organization like the military as well as in a marriage. Make sure that both of you are involved in these important decisions so that both of your perspectives can be taken into consideration when planning for your financial future and retirement.
September: Update Your Beneficiaries
One item that’s especially important (but often overlooked) is updating your beneficiaries. For all the accounts that you have on the federal side, make sure that the right person is going to get them if something should happen to you.
Naming a beneficiary takes the guess work out of the courts deciding where your money goes. And better yet, by naming a beneficiary, the money not only bypasses the probate process, but it’s also paid out immediately and not subject to any creditors. There are a lot of protections that simply naming a beneficiary can put in place. So, I always suggest employees be proactive in naming that beneficiary and keeping them up to date as life changes along the way.
If you need those forms, you can go to fedimpact.com/beneficiaries. All the forms are listed right there for you.
October: Cut Out Any Unnecessary Expenses
Try cutting back on things that are not needed right now. Snip bills and subscriptions. You have a Spotify account and so does your husband… and so does your kid. Get rid of redundancies and recurring payments and it’s like finding free money.
Keep a financial journal and make a list of every single monthly expense you have, both fixed costs like rent and utilities and variable costs like groceries or household items. Then, aggressively trim wherever you can. Are there video streaming services you’re not using? Do you have a gym membership that you never use? You can also call your cell phone company, credit card company, auto insurance agent, and internet provider to see how you can reduce your bills. They may have reduced packages or discounts that you can get at a lower cost.
November: Learn About Your Unique Federal Benefits
Your federal benefits are incredibly unique, so it’s important that you get the insights you need before making any financial decisions. This is especially true if you’re near retirement since some of those benefits will change when you stop working.
An easy and free step for you to take in the new year could include attending one of our short webinars or full-day retirement workshops, specifically for federal employees. Both are offered with no cost and no obligation, plus spouses are encouraged to attend.
December: Consult a Financial Professional
With so much information online, it may seem like you can handle all your financial planning decisions on your own. However, working with a financial professional who tailors their practice to working with federal employees is essential to getting your finances on track. They will help you to navigate the complexities of government programs, articulate your goals clearly, anticipate planning challenges and help you to make better decisions based on your true needs.
We have an entire network of financial professionals who do exactly this. Need an introduction?
Whether or not your financial goals were derailed in past years, we look forward to continuing to help you take the next steps toward your retirement and financial future in 2024 and beyond.
If you’re ready to get serious about planning for your retirement from federal service, register to attend a workshop today! We have Virtual and Live events available.