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Become a Better Money Manager

Become a Better Money Manager

Resolving to become a better manager of your finances can provide you with greater security and enable you to reach your goals. Let’s look at how to make—and keep—your financial resolutions.

1. Set SMART financial goals

The first step toward achieving your financial goals is to set parameters against which you can measure your progress. That means ensuring your goals are Specific, Measurable, Achievable, Relevant, and Time-bound, or SMART.

Using the SMART approach will force you to be more precise about what you want to achieve and give you less room to make excuses should you fall short. Here’s an example to get you started:

Vague goal: Contribute to my 401(k) each month.

SMART goal: Contribute 5% of my salary to my 401(k) each month in order to receive my employer’s full matching contribution.

  • The goal is specific: If you don’t already know your employer’s matching percentage, ask your Human Resources department.
  • The goal is measurable: You can easily see whether you’re having enough deducted from your paycheck each month to get the match.
  • The goal is likely achievable, since it’s a small percentage of your pay and can be automatically withheld.
  • The goal is relevant, as retirement savings is among the most important financial issues anyone will face.
  • The goal is time-bound, because you’ve committed to contributing a specific amount each month.  

Be sure to take the time to actually write down your SMART goals, which will form the basis of your financial plan. Research has shown that creating a written financial plan is more effective than simply thinking or talking about your goals. Indeed, more than two-thirds of people who have a written financial plan say they feel financially stable, whereas about a third of those without a plan feel the same way, according to Schwab’s 2019 Modern Wealth Survey.

2. Turn your goals into an action plan

With your SMART goals firmly established, now it’s time to look at your goals individually, ranking them in order of priority and assigning a price tag to each. This helps you see how much money you’ll need each month to achieve all your goals.

Once you’ve tallied up your goals, if any of them seem unattainable, take a step back and reassess. For example, maybe you should consider a less expensive house or giving yourself more time to save for the down payment. Perhaps you should investigate other ways to help fund your child’s education, such as grants, loans, and scholarships. Or maybe you need to take a closer look at how to reduce your monthly expenses.

The key here is to have manageable goals that you can stick to. Even if they seem more modest than you might want, trust that having goals—and a written financial plan—will help you make more progress than you would otherwise. 

Be sure to root your plan in realistic assumptions as well. For example, how much can you expect to earn on your retirement portfolio each year? How much will a four-year college education cost, on average, by the time your child is ready to enroll? Historical rates are a good starting point for such projections, as are retirement and college savings calculators. In the case of stock market returns, however, past performance may not be indicative of what you can expect in the future. For example, although the S&P 500® Index returned an average 10.6% annually from 1970 to 2019, many analysts—including those at Charles Schwab Investment Advisory—expect slower growth in the next decade.

It can also be useful to look at different scenarios when making your projections. If you can reach your retirement goal with your current contributions and a 6.5% annual return on your investment portfolio, for example, it might be good to look at how a 5% return would affect your situation. If even a slightly smaller annual return would leave you far short of your goal, you may want to consider upping your savings target to account for that possibility.

3. Make quarterly commitments to stay on top of your finances

Organizing your financial goals and clarifying your financial plan aren’t going to help you stick to your resolution unless you commit to your plan over time. Consider creating a detailed quarterly schedule of money-related tasks for the year. For example:

  • First quarter (January–March)
    • Portfolio review. The start of the year is a good time to check that your investment portfolio’s mix of assets matches your risk tolerance. If investment gains or losses have allowed the portfolio to stray from your intended allocation, it may be time to rebalance. (This may be something you want to check every quarter.)
    • Taxes. Remember that you need to pay quarterly taxes if you’re self-employed or if your paycheck withholding isn’t going to cover all your earnings, incentive pay, and investment income. These are due on January 15.
    • Health care. Funds in your flexible spending account (FSA) are use-it-or-lose-it. You usually have until March 15 to spend unused balances, so the start of the first quarter is a good time to check on what’s left. Money in health savings accounts (HSAs), on the other hand, does not expire.
    • Credit reports. It’s important to pay attention to your creditworthiness. You’re entitled to a free credit report every year from each of the three big credit reporting companies (Equifax, Experian, and TransUnion), so it’s a good idea to space these out over the course of the year. You should also be watching your credit score regularly, and this is easy to do, as many credit card companies now provide free access to scores.
  • Second quarter (April–June)
    • Taxes. When the second quarter begins, the annual tax filing deadline is usually imminent (April 15).
    • Retirement. Tax Day is usually also the last day you have to contribute to an individual retirement account (IRA) for the prior tax year. You can contribute up to $6,000, plus an additional $1,000 if you’re age 50 or older.
    • Insurance. This may be a good time to do a policy check. Are your home, auto, and life insurance policies adequate to protect you, or should you perhaps increase your coverage? Life events such as divorce, marriage, or illness can affect what you need.
    • Social Security. It’s good to review your Social Security benefits at least once a year, checking for errors but also keeping track of how much you can count on for retirement in your financial plan.
    • Credit reports. If you haven’t already done so, now may be a good time to request your second credit report.
  • Third quarter (July–September)
    • Taxes.
      • Estimated tax payments: If you’re self-employed or paying estimated taxes for some other reason, the start of the third quarter is a good time to look at whether your contributions are on track. You still have time to gradually pay or set aside more, rather than face an ugly surprise at the end of the year.
    • Check your progress. With half the year behind you, it’s a good time to check your progress toward your goals. If you’re falling behind on any of them, revisit your financial plan to see where you might need to make adjustments.
    • Credit reports. If you haven’t already done so, now may be a good time to request your third credit report.
  • Fourth quarter (October–December)
    • Health care. Changes to your FSAs or HSAs usually need to be made during open enrollment periods that occur in late fall; any changes to health insurance coverage usually also has to be done at this time. It’s good to reexamine how you’re using all these benefits as the fourth quarter begins.
    • Taxes. This may be a good time to start thinking about any tax-deductible donations you want to make the following year, while you still have time to do research and aren’t distracted by the end-of-year holidays.
    • Estate planning. As the last quarter of the year begins, it may be a good time to check that your will is updated—or to be sure you have one. It’s also good to think about whether you need to change the beneficiaries named on retirement accounts or life insurance, as these also sometimes need to be updated to reflect life changes.
    • Portfolio review. Near year-end is a good time to review your portfolio, to sell some investments that may have appreciated in value to purchase others in order to restore your targeted asset allocation—that is, the overall mix of stocks, bonds and cash in your portfolio—or generate cash, if you need it, in retirement. You can also take advantage of tax opportunities before year-end, such as tax-loss harvesting, to manage taxes before year-end.

Get moral support

You have SMART goals, a financial plan, and a quarterly schedule to help reach it. Now tell someone about it. Behavioral science research shows we’re much better at sticking to our goals when we share our intentions with a relative or friend. Enlisting someone to help hold ourselves accountable is a great way to ensure that we keep our resolve to become a better steward of our finances.

What You Can Do Next

Important Disclosures:

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly.

Diversification, rebalancing and asset allocation a portfolio cannot assure a profit or protect against a loss in any given market environment. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be created that may affect your tax liability.

Investing involves risks, including loss of principal.

Past performance is no guarantee of future results.

This information does not constitute and is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.


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