New Year’s Financial Resolutions

As we close out 2019 and get ready for a fresh start in 2020, it is time, once again, to talk about New Year’s resolutions.  Despite the fact that most resolutions have a tendency to go by the way-side by February (in a good year), here we count-down our top five financial resolutions everyone should consider making, and keeping, for the new year.


5. Start Tracking Your Spending

Without a clear understanding of how and where you are spending your money, you can never really know where you stand financially.  The truth is, most people don’t really have a clue.  One of the hardest parts of being a financial planner, and developing a meaningful and realistic financial plan, is getting people to honestly understand, and report, what they are actually spending.  I have done hundreds of financial plans, and in general, the expense figures clients provide tend to be wildly inaccurate.  I know this, because when I show them how much extra money they should have each month, based on their reported spending, their eyes get wide and they inevitably say “we don’t have that”! 

I understand how hard, frustrating and time-consuming, tracking your spending manually can be.  The good news is, in today’s high-tech world, there is lots of help available.  Cloud-based platforms such as, which is free to use, or the quicken budget tracking software, which you will need to purchase if you don’t like the idea of using cloud-based software, are two that I have seen used quite effectively.  What I believe makes these programs so helpful and different from tracking your spending manually, is that instead of you telling them how much you spend and where you spend it, they tell you.  You add your credit cards, bank accounts, and mortgage information into the system, and it does the rest.  Yes, it takes a significant amount of time and energy (often accompanied by some serious learning curve frustration) to get the system up and running correctly, but once you have, the output is invaluable.  Also, the longer you track your spending with one of these programs, the better your data becomes.  There is no better time than January 1st to get started tracking your spending, and before you ask, yes, it is okay if you wait until you feel better on January 2nd!


4. Conduct an Estate Planning and Beneficiary Review

One of the most important things you can do to protect yourselves and your loved ones in the new year, is to make sure you have adequate estate planning documents, and that these documents have been updated as needed.  Estate planning documents should always include a will, health care directives and springing powers of attorney, and, in many cases, they should also include revocable and/or irrevocable trusts as well.

Many people don’t realize that if they die without a will, the state has one they will automatically provide for you.  In essence, it’s a will by default.  And, since you would never sign your name to a will you had not read (and I’m guessing most of you haven’t read the state intestate laws), you should always have a well thought-out and legally-drafted will in place.

What many people also don’t realize, is that even with a valid will in place, you still don’t avoid probate in California.  A will is simply your instructions to the probate court.  So, if you want to avoid probate altogether (and the associated costs, delays and hassles), you need to make sure you have proper beneficiary designations in place on your retirement accounts and life insurance policies, and that your non-retirement assets, like your house, large bank accounts or investment accounts, are held in the correct form of ownership. These forms of ownership, Community Property, Joint Tenants, Tenants in Common, and Trust ownership, if administered correctly, can avoid the probate process all together.


3. Increase Retirement Account Contributions

The beginning of the new year is a great opportunity to get on track for your eventual retirement.  Increasing your savings, even by a small amount (especially if you are still relatively young), can have a major impact on your chances for long-term retirement success.  For example, assuming a 6% annual rate of return, a 35-year-old, who plans to work until age 70, and contributes an additional $250 per pay-check every two weeks to their 401(k), will have accumulated approximately $540,000 or more in additional dollars in their account come retirement time.  If you have the ability to increase your contributions by $500 more per pay-period, the amount in the example above goes to approximately $1,080,000 or more accumulated for retirement.


2.   Hold Adequate Cash Reserves

I realize that cash reserves is generally not a very sexy investment topic, and not something that will garner a lot of attention or enthusiasm at your New Year’s Eve party this year. However, I am here to tell you, that cash reserves are actually the most important part of any realistic long-term financial plan and investment strategy.

Informed and effective financial planning and investing, where you attempt to put the odds of long-term success in your favor, means investing for the long-term, period!   And without adequate cash reserves, you will never know if you will actually have a long-term.  You can come up with the greatest financial plan and long-term investment strategy on the planet, but if you don’t have the time to see it through, because you are forced to access your investment assets sooner than planned, it is impossible to consistently put the odds in your favor.  That is why cash is king in any realistic financial plan or investment strategy.  We like to think of cash as portfolio insurance. It helps to ensure that you will be able to leave your long-term investment assets invested for, you guessed it, the long-term.

Our standard rule of thumb is that you should have at least six months’ worth of spending needs (net of taxes and savings), set aside as cash reserves.  And if you have a less-than-stable employment situation, or are getting close to retirement, 1-2 years’ worth of spending needs set aside as cash reserves is better.


1. Make Sure You Have Adequate Insurance

Just as with cash reserves discussed above, insurance should play a crucial role your financial stability and readiness for this new year, and every year.  This includes life insurance, health insurance, disability insurance, home-owners insurance, liability insurance, auto insurance and long-term care insurance.  Again, without adequate risk protection in place, you will never be able to put the odds of long-term investing to work for you.  Insurance helps provide the protection you need in order to be able to leave your long-term investments alone regardless of the roadblocks and bumps that inevitably come along in life. It seems counter-intuitive in a lot of ways, but as we like to say, insurance is the one thing you want to pay for year after year and never actually use.

So there you have it, this year’s edition of our New Year’s financial resolutions. We hope you find it useful and wish you all a happy, healthy, and prosperous 2020 and beyond!





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