Blog — Sisters for Financial Independence

The best time to plant a tree was 20 years ago. The second best time is now.

Happy New Year! Another year, another 365 days of well-meaning resolutions. To help you achieve your financial goals, we’ve come up with 19 actions items to take into the New Year. Yes 19! Pick one or two to focus on the first quarter, then another two for the next quarter. Do not overwhelm yourself by doing too much.

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#1 Contribute to Your Company Sponsored Retirement Plan

A basic move and one that you will find in every and any list concerning personal finances. So why aren’t you contributing yet? What’s stopping you? If your company matches contributions, it’s the easiest way to double your money. Where else can you get that kind of return? Plus, if you also think about it, a company match is technically part of your compensation so why not take advantage of it. If you don’t, you are literally leaving money on the table.

If you are not contributing, contribute at least to the company match.
If you are already contributing to the company match, increase your contribution by 1% or 2%.
If you received a raised, increase your contribution the same amount as your raise. This helps reduce lifestyle inflation.

For 2019, the IRS has raised the contribution limit from $18,500 to $19,000, add to that the company match and you could be walking away with a significant nest egg. Don’t forget too that contributing pre-tax lowers your taxable income for the year. Check your first paystub at the beginning of the year and adjust your contributions. Part of your increase contributions will be offset by a a decrease in taxable income. Retirement may seem far for many of us, so don’t think about retirement at 65, think about financial independence earlier on.

#2 Contribute to your HSA or FSA

I don’t remember the HSA and the FSA being advertised heavily when I was in corporate so I want to tell you to review your health plans carefully. An HSA is a Health Spending Account and an FSA is Flexible Spending Account that allows you to set aside money for health expenses like deductibles, and other potential medical and dental costs.

Why contribute? It’s essentially forced savings for future medical costs, which increases as we all get older. An HSA normally is tied with a high deductible health plan and unused balanced rollover into the next year so any unused money can accumulate over time providing you a great cushion for potential medical emergencies. Many of us have the advantage of being healthier in our youth so getting a higher deductible and using an HSA can be positive move for your future self. An FSA is “use it or lose it” so you’ll have to plan your expenses accordingly. Both accounts allow you to contribute pre-tax dollars as well which again lowers your taxable income. Saving early in your career can provide you a nice sum later on to use for maternity costs, children’s medical costs, etc. Personally, I used HSA to cover the costs of my LASIK surgery a few years ago and a dental procedure that was more than I expected.

If you do have an FSA with funds, don’t forget you have to use it up by March 31. Head to HSAStore.com or FSAStore.com and see what’s eligible. These can include items such as sunscreen, bandages, prenatal vitamins, pregnancy test, etc.

#3 Read Your Employee Benefits Handbook

How many of us really read the Employee Benefits Handbook? There’s most likely a treasure trove of other benefits that you could be missing out. A common one is the Employee Assistance Plan that can get you access to counselors for a wide variety of needs. It doesn’t hurt to ask if your company covers help in dealing with a personal issue. If you and your partner both get benefits, review those plans and handbooks to see which fits your needs. Accessing some of these benefits can greatly reduce any financial burden you may incur.

#4 Take Advantage of All Reimbursements

Many companies now offer reimbursements for many things as a company benefit. Check with HR to see what’s covered, but in the past, for me, this has included gym, tuition, continuing education, bike sharing, meals, training, etc. It doesn’t hurt to check around and see what’s covered. Small companies especially have a ton of unique benefits that you may not normally find in large corporations so check the company intranet for forms and documents relating to potential reimbursements. This can add up to a few hundred dollars and significantly reduce expenses for items that you are already spending money on.

#5 Get Life Insurance

Life insurance is about death. More importantly, it’s about protecting your loved ones in the case that something happens to you. Life insurance is less about you, but more about the people you leave behind. If your partner, children or other dependents depend on you for survival (income), life insurance is highly critical. Get it an at early age when you are younger and healthier. Your premiums will be much lower and it offers you the benefit of great piece of mind.

If it’s just you and no one depends on your income, then life insurance may not be necessary just yet, but also keep life insurance as an option not only in the event of your death, but also in the event of a disability. Better to protect your family for a few dollars a month than jeopardize their well-being.

#6 Get Out of Debt Quickly

Oh the machine of debt. It’s the reason why most of us need to work. It’s the reason most companies exist, but did you know you debt is not the only way. Think about it this way, with debt, each day that you wake up, you are working against the clock. You must earn enough money to cover today’s living expenses, plus yesterday’s expenses and interest. Debt free is possible so work towards paying down debt as quickly as possible. You are not tied down to a monthly payment. Relish the joy of feeling #paymentfree. Whichever method you choose to pay off debt, be it high interest rate first or lowest amount, get diligent about paying it all off. The faster you can pay off debt, the faster you can invest and make your money work for you.

#7 Check Your Investment Allocations and Fees

January is a good time for an investment checkup. Re-balance your portfolios as needed. What does this entail? It means selling stock or funds so that your ratio of stocks vs. bonds. vs. cash is as you desire. Normally, over time, as the economy shifts and adjusts, your allocation also shifts. We personally like Personal Capital (review here) for aggregating multiple accounts in one place. This is especially helpful if you’ve got old 401Ks, IRAs, investments, etc. in multiple places. Their free tools provide a way to see what kind of investments you are holding the most and the fees associated with them. Fees add up and eat into your returns so choose funds that have low expense ratios so you keep more of your money. Getting that holistic view can help you spot over-allocation, duplicates and unused cash reserves. Better than Mint because it looks at investments instead of daily budgets and expenses.

#8 Don’t Even Think About That Raise

Before your raise hits your paycheck, set it up so that you don’t see it. Pay your future self first. Remember that at some point, your future self will stop working. Who will pay you? If you think ahead, you can set yourself up to pay yourself. By “ignoring” your raise, you won’t be tempted to spend it.

Lifestyle Inflation is a very real phenomenon in which our expenses increases as our income increases. Most of it due to the idea that “we deserve” new and better things because we’ve worked so hard for it. That may certainly be true so we all need to find that balance between treating our present selves, but also ensuring our future selves are cared for.

Before that raise hits, increase your retirement allocation or saving allocation by a similar percentage or increase your automatic deduction to a debt payment. The goal is to keep you living at the same rate as before and socking away that money so that you can buy yourself time later on.

#9 Reduce Reliance on Credit Cards and Venmo/Paypal

Sometimes going old school can be a great way to curtail spending. It’s ironic that I make this suggestion as more places are going cashless, but the reality is that going cashless distances you from your money. Without actually touching your money and seeing it disappear from your hands, you barely feel the pain of paying and you rarely think twice about spending. Humans are generally loss-averse, which means we prefer to avoid feeling losses. We would rather not lose $5 than gain $5. This is an important concept to understand as more tech is geared to make paying efficient. When we can pay with a tap of a watch or a phone, we don’t see that money as a tangible asset and therefore we spend it so much more. Try out a cash week and see how your spending changes.

#10 Start Your Side Hustle

Progress over perfection! If are looking to earn money on the side, start your side hustle today. Your side hustle doesn’t have to be perfect. It doesn’t have to have the perfect name, logo or tag line. If you can provide a service that others value and will pay for, then do it. As you hone your skills over time, your craft will get better, as you work with more clients, you’ll understand their needs better and then you’ll be better equip to formulate a plan for moving your side hustle to a full fledged business.

#11 Save for the Things that Are Likely to Happen

Statistically, many of us will follow the same path as we age and grow older. We will all want shelter, people to love, time and money to travel, and all of us will eventually stop working (because our bodies no longer allow us to or because we don’t want to.) It’s good to start planning for these things now. Sorry to say that Prince Charming won’t be coming to rescue any of us. The odds of winning the lottery is pretty low. Our parents have yet to live their retirement so the odds of us getting an inheritance will be low. Lastly, the world will not end tomorrow despite what the news says.

We are all bad predictors of the future so don’t try to predict it, instead look at the statistics of the likelihood of marriage for young adults, 100% retirement for all of us, your wants at having children, your needs for having a place to live, etc. Save for those, because as much as we would like to think that we are all unique, most of our needs are the same so save for that house, for that wedding, for your future children, for retirement regardless of how far they are into the future.

#12 Contribute to an IRA

If you follow Financial Move #1 and maximize your 401K earnings from age 25-65, you would have saved $760,000 dollars by the time your reach 65. Seems like a lot and it doesn’t even account for returns. If you live to be 85, you can withdraw $38,000 a year so that your money makes it to your death, but what if you live longer, what if you incur additional medical expenses, what if you lose your job and the new one doesn’t offer a retirement plan, you can supplement your savings with an IRA.

The best part about an IRA is that it is not tied to any employer. As long as you are employed with a W2, you can open and contribute to an IRA up a maximum $6000 for 2019. There are income limits, but don’t worry about that for now. The IRA, which stands for an Individual Retirement Account, has slightly of a misnomer because it’s not just for retirement. The funds can be used for education and home buying as long as you meet certain requirements. I used a part of my IRA as down payment for a condo.

Consider opening an IRA this year and automatically it fund it a few dollars a month. As you get used to money being taken out, increase it. Again, it’s another source of savings. An IRA will most likely be invested in the stock market so it’s returns will be greater than parking your cash in a savings accounts. Consider an IRA as long-term savings though.

#13 Review Your Credit Report

Your credit history and score is a large factor that determines how much gets lent to you and what interest rate. It’s important to check your credit report at least once a year. There’s Federal Law that mandates individuals be able to check their credit report for free at least once a year. You can head to https://www.annualcreditreport.com to do so. It will allow you to pull up reports from the 3 credit bureaus. Check it for errors and correct errors right away. This is a good way to also check that payments are being reported properly and that no new accounts were opened without permission. Lenders heavily rely on the credit report to rate you as a borrower so it’s important that you be diligent with what appears in this report.

#14 Negotiate Your Bills

You’d be surprised at what a few minutes with a customer rep can net you. Review your bills and tackle those where you’ve been a long-time customer. Use this as leverage to get a discount on services that you’ve been using like phone services, cable, gym, etc. Americans fear negotiation because we aren’t taught how to do it. The best way to negotiate is to come prepared with information.

Know how long you've been a customer
Know the company’s current promotions
Know their competitor rates (shop around)
Know what you want and are willing to bargain for

It costs more for a company to get a new customer than to retain one so take advantage of this and work to negotiate lowers rates for services you use often.

#15 Schedule Those Money Dates

We always have the best intentions when the new year starts so before life gets hectic, schedule those money dates today. Make it a personal commandment to meet with yourself, with your spouse and with children or parents (if needed) to have a conversation about money. The goal is to inform and get feedback as to the state of the family’s finances. This will require that you and others be honest and upfront about money worries. Money is always a touchy subject but push forward. It’s important that you, your spouse and other family members are aware of your financial situation in case something happens to you.

To make money dates successful, schedule it on everyone’s calendars ahead of time. Crowd source an agenda so that everyone’s needs are addressed. Make sure there are no distractions. Come with with open mind and listen to each other. Come up with a list of action items for everyone to do moving forward.

If you need help talking money with children, check out this resource.
If you need help talking money with your aging parents, here’s an article to help.
If you need ideas on how to get your finances in order while kids aren’t in the picture yet, read this article.

#16 Review Those Subscription Plans

Automation can be a big helper when it comes to savings, but it can also be a big drain when it comes to expenses. Many companies actually use the subscription method to ensure you continue to spend with them because you are less likely to cancel something if it’s already setup. Take a new approach this year and get ruthless with your subscription plans. If you are not using the service or the products that come in, cancel it. Better to save your money up front than hope you will eventually use the service or product later on. You may be getting a discount now, but if it’s not serving you, it’s not worth the expense.

For subscription boxes, think about the products you are actually getting. Is it really cheaper coming from the box? Could you get that product somewhere else for a much lower price? Do you use all of the products coming from the box? Odds are high that by the time you get to that product, it will be expired or out of trend. If you are reluctant to cancel it completely, request to Pause it and see if you miss it. Subscription boxes play into our need for serendipity and fulfillment and it may be time to address to those in other ways instead.

#17 Sell Your Clutter

Let 2019 be the year you live a less cluttered life. Look around! If you really think about it, all of that stuff around you was once money. Could you have paid off debt already or traveled somewhere amazing instead of buying all of that stuff? If you’re like me and millions of others, you probably have watched or have seen trailers of the new Netflix Show Tidying Up with Marie Kondo. One of Marie’s first ask of the show participants is to place ALL of their clothes on to their beds and undoubtedly this pile is very high for majority of the show’s participants. Stuff equals Money. How much of your time and energy were used to buy, maintain and store those clothes? We rarely think about the external costs of a purchase, but it adds up. Having an extra room to store items means heating extra square footage or paying rent for closet space. Having multiples of items means we spend more time looking for things than actually enjoying the object.

Cutting the clutter can help you reclaim money and time. Don’t neglect it as a power move for 2019.

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#18 Join a Money Group

We absolutely need to normalize conversations about money. For the new year, commit to joining a money group be it online via Facebook Groups or in-person. Find space where you can openly talk about your money concerns without judgement or fear. Hear and listen to what others have experienced when it comes to money. Sometimes, we don’t have to make the same mistakes. I consider myself an #eldermillineal to I am happy to share my money mistakes. Many people have walked the same paths as you and can offer your advice and tips on making money work for you. Don’t be afraid to ask.

If you can’t find a group that you click with, form one. Join your friends together and setup your own tribe.

Sisters for FI has it’s own Facebook Group if you want to join and if you are local to central NJ, we meet once a month too. Find us on Meetup or search for something in your local area. You don’t have to it alone.

19) Invest in Yourself

Many of us spend thousands of dollars for a college education. After college, we rarely think about continuing our education. Before 2019 is up, commit to investing in yourself. Figure out what skill, course or language will take your career, your personal life to a new level. Everything is at our fingertips now, so there’s barely an excuse.

I know it’s easy to come home and zone out in front of Netflix, but if you really want something you’ve never had, you’ll have to do something you’ve never done.

Remember that you probably spent thousands of dollars for an undergrad or graduate degree, come from an abundance mentality and don’t let a few hundred dollars of investment for a class that you want to take to deter you from improving your situation. It’s all relative. A class, a book, a coaching session might teach you more and might be worth more to you in the end.