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Ten Simple Steps for Financial Success in the New Year

Key Points
  • Making plans for the future is part of the fun of the New Year.

  • While dreaming is great, you have to be on top of your money to make your dreams a reality.

  • Set a foundation for success by taking these ten financial steps. They're not difficult—and may make the New Year that much more rewarding!

Dear Readers,

Making plans for 2018? To me, that's part of the fun of the New Year. It's a time to think ahead and anticipate all the future possibilities. It can be as grand as a new home or as simple as treating yourself to a night out more often; as serious as getting out of debt or as fanciful as planning for that once-in-a-lifetime vacation.

But while dreaming is great, the reality is that you have to be on top of your money to make those things happen. So before you set out on your 2018 adventure, why not set a foundation for success by first taking these ten financial steps. They're not difficult—and they just might make the New Year that much more exciting.

1) Get real about your budget.

Creating a budget is as simple as knowing what comes in each month—and what goes out. Don't just guess. Double-check your income, then track your spending for 30 days. Figure out how much goes toward essentials and how much is left for extras. If you regularly spend more than you earn, that's a red flag. (Online tools can help you track and set a budget).

2) Take a look at what you own—and what you owe.

Make two lists: your assets (what you own), and your liabilities (what you owe). Then do the math. This gives you a good benchmark for future comparisons. If you owe more than you own, you may need to do some debt control or reprioritize your savings and spending. That takes you back to step 1, where you can revisit your budget and decide where to take action.

3) Give yourself a cash cushion.

Nothing can derail your plans like a financial emergency. Don't get caught unprepared. Ideally you want to have enough cash handy to cover three-to-six months' essential expenses. Sound impossible? Again, back to step 1. Figure out how much you can afford to put toward your emergency fund each month and have that amount automatically deposited in a savings account especially earmarked for that purpose. When you reach your goal, you can put future savings toward something more fun.

4) Amp up retirement savings.

No matter what your New Year's goal, saving for retirement should be high on your list. Hopefully you're already stashing money in your retirement account every month, but make sure it's enough. If you’re over 25 and saving less than 10 percent of your salary, you should consider increasing the percentage. Expecting a bonus? Send the bulk of it to savings.

5) Put all savings on automatic.

If you're contributing to a 401(k), you know how easy it is to adjust to an automatic deduction from your paycheck. Why not do the same for your other savings goals? Whether you're saving for a house, college, or a vacation, automatic deductions from checking to savings will add up without you having to think too much about it.

6) Create a financial calendar—and use it.

Letting time get away from you can be costly. Don't risk incurring a penalty by missing a due date. Put important financial dates on your calendar such as estimated taxes, property taxes and RMDs—and pay attention to them. Set up reminders a few days in advance of the due date.

7) Set up auto pay for recurring bills.

Late fees can blow a real hole in your budget. Avoid them by putting recurring bills—mortgage payments, utilities, insurance premiums, phone and Internet—on automatic. But don't just set it and forget it. Check in periodically to make sure the proper amounts are being deducted.

8) Stay on top of insurance.

Health, life, auto, renters, homeowners—don't take your insurance coverage for granted. First make sure you have it, then make sure you have the right kind of coverage for your needs. The recent natural disasters have people nationwide double-checking to make sure their property insurance is adequate. Remember, too, that premiums are only part of the cost. There may also be co-pays, deductibles and out-of-pocket limits to consider. If your current policies aren't working for you, shop for different insurance.

9) Start investing.

Saving is one thing, investing is another. Money you need in the next five years probably shouldn't be in the stock market, but for long-term goals get going right away. If you don’t have the time or expertise to monitor and rebalance your investments, consider using an automatic investment advisory service. Let the pros help build and manage your portfolio in keeping with your personal goals—minus the hassle.

10) Have the money talk.

If you talk about New Year's plans with your family, why not talk about the practical ways you can work together to make them happen? To me, money should be an open topic with your spouse or partner. Even young children can be included in things like saving for something special, and they can learn valuable money lessons from the family's experience.

Of course, you don't have to take these ten steps all at once. Just keep them top of mind as you work toward your 2018 goals. That way, next New Year's Eve you may find yourself reminiscing about all the wonderful things you accomplished.

Here's to a personally fulfilling and financially rewarding New Year!

Have a personal finance question? Email us at  askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries,  contact Schwab.

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Important Disclosures

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The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. 

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