20 Financial Actions for an Abundant 2020

Written by Brad Clinard, High Point Financial Design

I love short articles, but I also love lists! Here is my list of 20 financial ideas to help you live a more prosperous and abundant life in the year and decade ahead.

1. Skip Resolutions… Make New Year's Systems and Habits.

The start of a new decade is a time to reflect over all the amazing things you have accomplished in a ten-year window. It is also a time to get clear on what you want in life in the years ahead. However, the research is clear, individuals are not good at sticking to New Year’s resolutions. Explore the person you need to become to accomplish your most important “wildly important goals” and then develop the systems and habits required to support that vision of you.

2. Invest in You

Your health may possibly be your most valuable asset. Yet, many of us do not take the time to care for our physical or mental health like we should. This starts with the fundamentals. Make sure you are sleeping, eating, and moving in ways that support the vibrant life you want to live. Make this a priority. Consider a personal development budget to invest in you.

3. Spend Less Than You Make.

Consistently spending less than you bring home in income is one of the basic keys to financial success and stability. Make a commitment to know how much you spend and where your money is going. Find a plan that works for you and your family! 

4. Start an Uncertainty Fund.

If you don't already have an uncertainty fund, start one today! This is what most people traditionally call an emergency fund. Target a minimum of 3 months’ worth of expenses and build it up to 1 year depending on your comfort level and degree of life uncertainty. This is your “peace of mind” account for any emergency money you need if you suffer a job loss, receive unexpected medical bills, face inevitable repairs and replacements, etc. Having an uncertainty fund makes you far more prepared to weather the storms and provides the peace of knowing you have a little breathing room with your finances. In the midst of stressful moments, that peace of mind can make a massive difference.

5. Increase savings to a target of 10%, 15% or even 20% of your income.

We have all heard by now you must “pay yourself first.” Unfortunately, not everyone does this. If you are not saving, just start somewhere TODAY by setting up an auto draft to save 1% and increase that by 1% every couple of months. In time, you will have less financial stress if you can save a larger percentage of your income. If available, take advantage of matching benefits available through many 401(k) plans or consider a Traditional or Roth IRA if you do not have a 401(k) plan offered through work. For those who want to live with less financial stress, we are big fans of the 50/30/20 budget approach.

6. Reduce your debt.

Debt is a future financial obligation that you are living with today. If that helps empower you to buy a home or fund an education, that is great. If it is used to fund an unsustainable lifestyle, it can be toxic. Write down all your debts and rank them by interest rate from highest to lowest. Make a systematic plan to be debt free and know when that will happen. If you need help, get help sooner than later. Seriously, take action now as time is not your friend when you are getting out of debt and it is not a problem that will go away on its own.

7. Calculate your net worth.

 We recommend updating your net worth statement each quarter as a proactive way to gauge if you are financially on the right track. This can be as simple as taking a paper and adding up the value of all your financial assets and subtracting out all your debts. This number is your net worth. Let me know if you want a digital tool or spreadsheet to help track this.

 8. Check to make sure you have right sized your insurance.

We often talk about “the certainty of uncertainty.” It’s just one of the unpleasant facts of life. Nobody wants to pay for insurance but everyone’s glad they have it when disaster strikes. Everyone's situation is different and not all insurance is created equal. Basically, insurance should cover you for financial risks that you cannot afford to experience on your own. Considering your life stage review your auto and home insurance, life insurance, disability insurance, health insurance, long-term care insurance and remember to adjust as your needs change. 

9. Organize Your Financial Life

Do you have all your finances on one page? Does anyone else know what you know? Many people only have all the details in their head. Consider creating a document that summarizes all your financial information in one place. Banks, investment accounts, safety deposits, insurance policies, key contacts, online assets, etc. The basic idea is that if anything happened to you or there was a natural disaster could someone else piece together and easy locate all the key data of your financial life?  If you are married, make sure to review this with your spouse.

10. Rid yourself of the weight of old records.

With digital files, it is becoming easier to keep detailed records. For most items, it is safe rule of thumb to keep seven years of files for tax purposes. We only keep receipts for major purchases, for business purchases or to support tax records of itemized deductions. Items to keep longer than seven years include estate documents, records relating to real estate, all past tax returns and 1099’s.

 11. Create or Update Your Financial Plan.

A pilot never takes off without knowing his or her destination. Absolutely, you will make course corrections along the way but it’s important to know where you are going. A true financial plan allows to explore trade-offs to make better decisions. What if you retire at different ages, claim social security differently, spend extra money on travel, buy that second home, or give money to the grandkids? Your financial plan should let you consider the ability to fund whatever your wildly important goals are that have a dollar sign.

 12. Create or Update Your Estate Plan. 

Many people fail to realize estate planning goes beyond just what happens to your assets when you pass. Regardless of whether you are single, married, divorced, have children or have no children, there are some key documents you need to legally have your wishes followed.  Consider talking with an estate attorney about the 5 key estate documents: Will, Financial Power of Attorney, Medical Power of Attorney, Living Will and Revocable Living Trusts. Consider an addendum in your will to reference a list outlining who will get important personal property. Be as clear as possible with your language and intent. Consider reviewing “The 5 Wishes” to help you explore topics to address.

 13. Perform a Beneficiary Review

Having an estate plan is not enough. Every so often, it is important to review all your beneficiary designations to ensure they are matched with your current wishes. Most people don’t remember how they signed these forms. Beneficiary designations control the distribution of money at your passing for all retirement plans, annuities and insurance. They can also be added to bank accounts and brokerage investment accounts. These designations bypass your will, so it is important they are listed in a way that is consistent with your estate plan and final wishes.

14. Protect Your Identity

Identity theft is a serious crime that can end up costing you lot of aggravation, time and money. The old recommendations of safeguarding your information by shredding financial documents and protecting your Social Security number are no longer enough in the digital world we are living. Practice safe internet use by using a firewall, keeping updated anti-virus and anti-spyware software and never click on links in unsolicited emails you can’t verify.  Consider a credit monitoring service or explore the ability to freeze your credit. If you suspect identity theft, act quickly. Place a “fraud alert” on your credit report and file a police report with law enforcement to document proof of the crime. You can review your credit report annual for free by requesting this information from the three major nationwide consumer reporting companies: Equifax, Experian, and TransUnion.

15. Set Your Kids Up for the future with Section 529 Plans and Roth IRAs.

Start early and take advantage of tax-advantaged savings plans. College savings plans or 529 plans can be a great way to set money aside for future college expenses. Once children reach working age, it may become possible to make Roth IRA contributions. This has the dual benefit of introducing the idea of saving money and starts investing to benefit from more years of the magic of compound growth. Both accounts allow for tax-free distribution for educational expenses if the rules are followed. Successful small business owners should take the time to explore additional tax strategies to help pay for children’s college.

  

16. Keep up with regular home and car maintenance.

Yes, life gets busy, but you need to maintain your property. For most people, you home and car represent valuable and expensive assets. Regular maintenance is key to avoid potentially large expenses if there is neglect. A little time and effort can go a long way. Check online or with your homeowner’s insurance company to find a checklist. Make it simple and automatic such as changing your homes air filters on the first Saturday of every quarter.

17. Reduce taxes and be intentional about the timing of your tax deductions.

Nobody likes paying taxes. The ways to reduce taxes are very dependent on your personal situation. If you are eligible and depending on your income level, making annual contributions to tax-deferred retirement accounts can reduce your taxable income. Consider a health insurance plan that will allow you to contribute to a Health Savings Account. Be aware of changes that impact your incentive to itemize. The recent tax law changes increased the federal standard deduction amounts to $24,000 for married filing joint and limits state and local tax deductions to $10,000. This has considerably reduced the number of families and individuals who itemize their taxes and subsequently lose the tax benefit of charitable contributions. There are planning opportunities to consider such as utilizing Donor Advised Funds that allow you to “bunching" your charitable donations which can be good for you and good for charities. You should consider exploring this in a year where you have major out of pocket medical expenses or major life events such as the sale of a business or secondary real estate transactions.

18. Embrace the Compound Effect in Investing and Life.

Albert Einstein is famous for many things but reportedly said, “Compound interest is the eighth wonder of the world. However, compounding doesn’t just impact your money. It impacts every part of your life. Dan Hardy’ explains his formula clearly in his book The Compound Effect: “Small, Smart Choices + Consistency + Time = RADICAL DIFFERENCE.” We also love his success formula: Your Success at achieving goals = Choices + Behavior/Actions + Habits + Compounded Over Time.  We believe focus is required to be successful financial because good investing is as much about avoiding get rich quick schemes as it is controlling your emotions. We think it is key to focus on controlling what is in your control, having a clear action plan and giving your financial and investment plan enough time to work.

19. Use Spending to Become Happier

Most people have heard the studies that say money only increases happiness to an income level of around $75,000 and then more money doesn’t bring more happiness. Well, Dr. Dunn completed extensive research to show that what actually makes people happier is how they choose to spend money. Hint – most of us spend on things that don’t bring happiness. Consider reading her book, Happy Money: The New Science of Happier Spending, where she explores the 5 ways to spend money scientifically proven to increase happiness.

20. Higher a Financial Designer

Yes, this may sound a little self-serving, but we are passionate about making an impact and serving others. Many people don’t associate with “wealth management” or have had bad experience with “financial advisors.” We get it. We created the concept of Financial Design as a unique way to encourage and empower our clients to use money as a tool to pursue their ideal life, not only in the future but also today. This is why we grounded our firm on the concept of “Intentional Planning. Abundant Living.” Reach out to our team to explore how we can help you live your abundant life in 2020. We wish you blessings!

Click here to schedule with Brad today!

High Point Financial Design is a DBA for Clinard Financial, LLC. Investment advice offered through GWM Advisors, a registered investment advisor. Securities offered through LPL Financial. Member FINRA/SIPC. Clinard Financial, LLC, and GWM Advisors are separate entities from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. CAR#1-936201