At the end of the year, I like to do some review of what happened and planning for what’s to come across all the areas of my life. Am I cool with my job(s)? Do I need to talk to someone I haven’t? What’s that whirling void in my life…oh wait, I’m hungry.
Pro tip: don’t analyze your year when you’re hungry.
What do I do? I get a snack, make a list, and eventually get to dealing with my money. Here’s my recommendations:
1. DO NOT FORGET ABOUT IRAs
This is not a test, this is about getting older and getting to have the things you need.
While you can put up to $5,500/year into a personal IRA and a ROTH, you can open an IRA account at Betterment or Ellevest for $50, one at Schwab for $500, one at Domini for $1500. The important thing is getting the *account open* before the end of the year.
If you earn income, whether from a side business or a regular job, and you have anything left over at the end of the year, give future you some new shoes and hook it up.
2. MAKE SURE YOUR CURRENT MONEY IS WORKING AS HARD AS YOU DID TO GET IT
Look at your personal savings account(s) and:
- Make sure your emergency fund is what you think it needs to be. Things cost more each year, are you able to cover them? Have you taken on new planned costs? This year I upgraded to keeping 3 mos. of costs in there (I did 2 previously since my income was more limited). The experts recommend 3-6 months liquid saved.
- Consider if your money is working hard where it is. This year, I accepted that liquid savings (eg in a bank) isn’t the smartest place to keep alllll my savings since it’s not earning interest on par with inflation, and if I’m not using the money soon, some of my savings could make me money. I took what’s left after emergency fund and short term savings (upcoming travel, tattoos!) and put it into a ROTH IRA. What’s great about a ROTH? You already paid taxes on the money, so after age 59.5 you can take out earnings tax-free, and, if you want to take your principal out before you retire, you can. Other high-interest options include bonds and CDs.
- See if you can pay off extra on any debt. This year, I decided that I could afford to pay down my student loans some, and still cover all the rest of my goals. Yay!
Look at your business bank account* and:
*Don’t have one? Do you have a small business? Start one as your first act of self-love in 2017. Trust me, it will simplify your life a lot.
- Make sure what you’ve forecasted for taxes is saved (good job, me – it was!)
- If/when there’s money above your tax needs, decide how to delegate it. This could look like:
– an amount put in an Individual IRA (thereby reducing taxes)
– an amount paid out to you in ca$$$h or put towards a ROTH IRA
– an amount held back for expenses early in 2017.
3. PROJECT NEXT YEAR & SET GOALS
Pencil. Spreadsheet. Tablet. Don’t care — since you JUST looked at this year, it’s going to be fresh in your mind. Do you think, if you saved $1000 in your vacation fund this year, you can do $1500 next year – how? from what account and into where?
Getting clear on what you want to do next year AND how you will pay for it make it WAY more possible. You deserve it, so take a gander.
4. EXPLORE OPTIONS IF IT IS TIME TO INVEST
After looking at everything and planning ahead, you’ll know if you have the income needed to put some aside into retirement or other investments. I’ve been doing a lot of research into various places to invest, and here’s what I’m doing:
1. Opening a new brokerage account at Schwab, where I already have a SEP IRA (for my small business), and clearing out some smaller investment accounts (byeee Acorns your $1/mo fee is losing me money!) to buy stock using that account. Just to do it.
2. Opening a personal IRA with Domini, purchasing their Equity Index since you can buy in for $1500 which isn’t nothing but is a lower-end buy-in for a solid SRI.
3. Opening a ROTH, somewhere, not sure yet, perhaps still with Schwab or maybe with Vanguard, I want to research my fund options and buy-in costs more.
5. PLAN TO EXECUTE YOUR PLAN
Great, there’s a plan to be smart with your money. But a plan unenacted is kind of just time wasted, right?
Get out your calendar and book time with yourself. One – two hours should do it. Your future self deserves and hour!