7 Important Money Moves to Make in the New Year, According to Financial Advisors

It's easy to think you'll get your finances together "next year" or when you finally get the promotion you've been after. Unfortunately, time keeps on ticking away, making it easy to spend years dreaming of financial security without making progress toward your goals.

Now that 2020 has arrived, it may be the perfect time to stop making excuses and start making moves. After all, it's more than a new year — we're in a brand-new decade.

But which moves have the potential for the most impact? We interviewed several financial advisors to find out which steps they think nearly everyone could benefit from in 2020 and beyond, and here's what they said. 

1. Increase your contributions to tax-advantaged retirement accounts

According to financial advisor Benjamin Brandt, who is the host of retirement podcast Retirement Starts Today, the beginning of the year is an excellent time to reevaluate how much you're putting away for retirement. Fortunately, the Internal Revenue Service (IRS) increased the maximum you can contribute to a 401(k) account in 2020, bringing up your total maximum contribution amount to $19,500. 

"Could you save a little more for the future version of yourself?" he asks. "Calculate what a 1% increase in your savings rate might be, and commit to that increase."

You might not even notice the money missing from your budget when savings is increased in such small increments, but you'll never know unless you try. (See also: 5 Money Moves to Make Before You Turn 40)

2. Take stock of changes in your life that took place over the last year

Financial planner Luis F. Rosa, who is also the host of the On My Way to Wealth podcast, says that pretty much everyone should sit down and analyze any big life changes they've endured over the last year or two, including marriage, divorce, or the birth of a new child. 

You should also review your beneficiary designations on your 401K, life insurance, and other accounts to make sure they are up to date as per your wishes, he says. (See also: 5 Money Moves Every Single Parent Should Make)

3. Learn to live within your means

Most people manage their money in the most backwards way possible, meaning they buy what they want and try to save anything that's left. Financial advisor Christopher Clepp of Strategic Financial Group says people need to "reverse their thinking" if they hope to reverse this trend in their lives.

Instead of buying what you want and worrying about savings as an afterthought, Clepp says to "invest for the lifestyle you want and spend what is left over." 

You don't need to keep track of every expenditure if you're saving enough to begin with, he says. "If you need to save 20% per month, then save that first and the other 80% spend as you see fit as long as you don't exceed that number or run up credit card debt."

4. Pay off credit card debt

Credit card debt may not be overly problematic for many people in the short-term, but this type of debt doesn't really help anyone in life. Credit cards carry an average APR of over 17%, after all, so they're a poor option when you need to borrow money. And since you can use them to keep spending, they can easily be used as a crutch to build a lifestyle you can't really afford.

Clepp says everyone should make 2020 the year they pay off credit card debt once and for all. He points out that, if you carry an average of $5,000 in credit card debt with an average APR from ages 35 to 65, that debt will cost you close to $20,000 in interest payments. That's a ridiculous amount of money, and I'm sure you can think of plenty of ways you'd want to spend that much cash. 

5. Assess your insurance needs

Clepp also says that people need to look over their insurance needs every year, even if they think they're up to date. 

"All the careful future planning can be undone by an unexpected accident," he says. First and foremost, you should review your home insurance, auto insurance, and any umbrella insurance coverage you have each year. 

Find someone who will educate you about the policies. "Cheaper isn't always better, but you may be able to find comparable coverage for a better price," he says. 

Also, make sure to review your life insurance needs if you're married or have dependents. From there, review your disability insurance to make sure you're adequately protected. 

6. Start using a budget

Financial planner Brandon Renfro, Ph.D. says everyone should give budgeting their income a try, and everyone should take the time to review their budget in the new year — even if it's working well so far. 

"You may find that there are smaller budget items you can eliminate," he says. "The key here is a lot of times the smaller items go unnoticed, precisely because they are small."

By going over your budget and spending for the year, you may find you're splurging in areas that don't matter to you, which could easily be reduced for more savings. You may also find you're not really using things you're paying for, such as subscription services. In that case, you could cancel unused services and funnel that money elsewhere in your budget, such as savings or debt repayment. 

Renfro says that, on top of reviewing your budget, you should also review any progress you're making toward your financial goals. 

"This goes a little farther than simply confirming that you took the specific actions you had planned to," he says. "Here, you are confirming that the actions you took actually got you closer to accomplishing what you hoped to accomplish."

For example, maybe you planned to pay an extra $100 each month on your car loan or credit card. If you did, see how much closer you are to getting it paid off. If you achieved your goal, that's great, and you may just want to stay the course. If not, you should be asking yourself why not and taking steps to get back on track. (See also: 5 Steps to Successful Budgeting)

7. Improve your credit score

Financial planner R.J. Weiss of The Ways to Wealth says another area of people's lives they should focus on is their credit score, although few people keep an eye on this component of their financial health. 

"This goal often gets prioritized when a large purchase is up ahead, such as a home," he says. "Yet, it's something that you should monitor and improve as there are many benefits to having a great score."

Specifically, he suggests consumers work on decreasing their total credit utilization. This is the amount of revolving credit you use compared to the amount of available credit you have. If you have total credit limits of $10,000 and $5,000 in credit card debt, for example, your total utilization is 50%. 

"A great target to aim for is a ratio below 30%," he says. "Keep in mind, you can do this by paying off your debt, as well as increasing the total amount you have available."

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Are you looking for some great money moves to make in 2020 to get financially ahead? We’ve got the tips to help you budget and get your personal finances on track this year! | #investing #personalfinance #moneytips

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