While every new year often bring resolutions to mind, we want to spend some time today looking at some financial housekeeping that can set you up for a successful year.
It’s important to plan ahead and start the year off strong with your financial goals – especially because you’re likely most motivated right now, while those goals are still fresh in your mind.
By setting the right financial foundations early in the year, you can help pave the way for your future self and continued growth and success for you and your family. To help you get started, we’ve outlined three money moves you can make now, including checking in on your retirement plan beneficiaries, reviewing your budget, and more – let’s dive in.
The Top 3 Financial Things You Can Do Now for Successful 2024 Finances
1. Review and Revise Your Budget
The beginning of the year is the perfect time to look closely at your budget, especially if you had any recent changes to your income or expenses, or even snagged a nice end-of-year bonus from your employer. And if you don’t have a budget – take out your last 3 months of bank statements and credit card bills. Go through them closely and average your spending.
As you set your goals for 2024 – like a vacation or a car you’ve had your eye on – it’s essential to think about how your finances can support those goals or if you’ll need to make any adjustments to reach the finish line. We prefer you consider funding a savings account first and designate the bigger goals into a separate one.
Related: 5 New Year’s Resolutions to Avoid in 2024
How to get started:
Start by looking at your budget and spending from the previous year (if you had one). Identify any areas where you consistently overspend or underspend. Then, look at your income, fixed expenses (needs), discretionary spending (wants), and savings. List out any significant changes you’ll need to account for, like salary changes, a recent inheritance, or higher health insurance premiums.
Consider how you can cut back or make changes to align your spending with your financial goals better, remembering that it’s good to challenge yourself while being realistic.
If you need help making sense of all the numbers, make an appointment with your financial advisor to review everything together. You can also download several apps to your phone to help you build a budget and track expenses (your bank of choice might even offer one).
2. Set Up Automatic Savings Plans
Suppose you don’t have a minimum of three months of savings for emergencies. Now’s the time to start a great habit. Start by automatically putting a certain monthly amount into a general savings account. Next, take your bigger goals and start putting monthly money into separate savings accounts. Then, take the remaining income you receive and then set up your budget.
Regarding retirement planning, the standard advice is “earlier is always better.” So, while many choose to contribute to their employer retirement plan accounts early in the year to get it done, this may not be the best strategy.
Let me explain: Many employers offer 401(k) matching programs, which match a portion of the employee’s contributions up to a certain limit. For example, in a 5% matching program where you make $80,000, you and your employer could contribute $4,000.
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5% of $80,000 ($4,000) + 5% Employer Match ($4,000) = $8,000 Total |
However, if you contribute the complete 5% ($4,000) in January and later receive a raise to $95,000 in July, your 5% match should increase to $4,750. The issue arises because you’ve already reached your maximum yearly percentage match by contributing the total amount early.
This means you might miss out on the additional employer match funds resulting from your salary increase. It’s crucial to consider the timing of your contributions to maximize your employer’s matching program effectively.
That potential for an increased match is one reason why spreading contributions throughout the year can benefit. This approach allows you to implement dollar-cost averaging by investing in smaller set amounts over time; you’ll buy both when prices are low and high. This smoothes out your average purchase price.
How to get started:
To plan for your 401(k) account contributions, you’ll need to familiarize yourself with your employer’s 401(k) matching policy, including any set limits. Then, set an annual contribution goal for 2024 that:
- Aims to contribute at least enough to maximize your employer’s match
- Keep your total contribution limits in mind (which varies based on your age – but for those under 50 in 2024, it’s $23,000 in employee contributions and $69,000 for combined employee/employer contributions)
It’s a great idea to make your contribution plan with the help of a qualified financial professional familiar with 401(k) policies, tax laws, and other pertinent information.
3. Check the Beneficiaries on Your Retirement Plans
Have you ever wondered what happens to your retirement savings if you pass away? You can choose by naming beneficiaries to your account!
Naming those you wish to inherit the account can prevent potential conflicts among your loved ones and help to ensure that your assets go to the right individuals.
Related: Tools of Retirement Planning, Part 1: Saving
Employer retirement plans like 401k, 403b and SIMPLE plans are where we find the most mistakes, many times having NO beneficiary. When you first sign up or the plan transfers to a new company, the beneficiary portion sometimes is not required at first. Newer plans are getting better but if you haven’t checked it – now is a good time to do so.
Usually, you name beneficiaries when you initially set up your account. But if it’s been years or even decades since then, they might need updating. Other significant life events – like a marriage, divorce, death, or new family member – might mean you need to make some revisions as to who will inherit your hard-earned savings.
How to get started:
You can usually check your beneficiary designations by logging into your 401(k)’s online account. Still, you can also call the plan administrator directly or even reach out to your employer’s HR team for more guidance. If you work with a financial planner, they may also be able to point you in the right direction.
Remember that when adding a new beneficiary, you’ll need their information on hand, including their full name, date of birth, Social Security number, and relationship to you.
Once you’ve made updates, it’s a good idea to double-check that they’ve been saved or request a confirmation to save to your records. Then, set a reminder for yourself to check again next year, or the next time you have a significant life event in your family.
After reviewing your 401(k) beneficiaries, setting a budget, and automatic savings, you can feel confident in your 2024 finances and start the year off strong.
Make a 2024 Financial Plan with Clarity
Here at Clarity, we’re your accountability partner. Once we set a financial plan based on your goals, we’ll help keep you on track throughout the year. Click here to learn more or schedule a consultation today.
