8 Ways to Achieve Financial Success in 2020
Like the everlasting quest to lose weight, financial success is something that almost always shows up as a New Year’s resolution. But how do you turn your goal into a set of action steps that help you achieve it?
Maybe it doesn’t happen quite the way you think. For example, does following the stock market help you achieve more financial success? After all, sassy market headlines are exciting—they get your emotions going. Think about you feel when you see these headlines:
- “Market Shaped for a Tumble in 2020”
- “Dow Set for Best Annual Return in Three Years”
- “6 Stocks Poised to Perform in 2020”
Some headlines cause concern, some make you think you’ve been missing out, and others make you wonder if there’s a way you could double your money this year. Headlines are designed to elicit emotion; that’s what makes us read on.
But do any of the articles that follow provide actionable advice that consistently helps you improve your financial situation? Probably not. Your personal habits and behavior contribute more to your financial success than anything else.
If you really want financial success in 2020, there are real actions you can take. They may not be exciting, but they work.
1. Make a Budget
One of the simplest and most effective things you can do to get control of your finances is to know where your money goes. Understanding how and where you spend is a powerful insight. People who been through several serious pay cuts in their life can successfully navigate them because they had a budget and could easily pinpoint the areas where they could cut back. In addition, it helps not to be emotionally attached to a lavish lifestyle. For forward-looking people, saving for retirement is more important than driving a fast sports car or having a designer purse.
2. Up Your Contributions to Your 401(k) Plan or IRA
Does your workplace offer a 401(k) plan? Be sure you are contributing enough to get the full amount of company match. If you don’t have a 401(k), then open an IRA. You can do this easily online through companies like Vanguard or T. Rowe Price.
If you already have a 401(k) plan, increase your contributions, now. Even if you just increase them by 1 percent, that's progress toward your goals. And next time you get a raise, make sure you increase your 401(k) contribution a bit too.
3. Don’t Watch the Stock Market
The stock market is not a spectator sport. Invest in what your accounts will be worth in 20 years. Ignore what's happening right now. The market moves today are not relevant to your long-term goals. People who want the daily excitement of winning or losing end up gambling and that's a sure way to lose money.
4. Get Better at What You Do for a Living
The best way to have job security and make more money is to get good at what you do—your job. Pay attention at work. Look for ways to contribute. Be the one who gets things done. Find ways to collaborate with your co-workers. These actions pay off.
5. Learn How to Be a Boring Investor
A famed quote on investing comes from economist Paul Samuelson, who said: “Investing should be like watching paint dry or watching grass grow. If you want excitement… go to Las Vegas.” Pick a few index funds (low-fee funds that own hundreds of stocks), put money into them regularly, and give your portfolio time. It shouldn’t be a surprise when the market goes down. It should be expected, like a drought. And during those times, you should just keep watering the grass. Consistent actions will help you achieve financial success.
6. Skip the Free Dinner Seminars
Free dinner seminars on investing are usually offered by financial salespeople who will make a commission if you buy their product. Products and services marketed this way are not always the ones that are best for you. If you’re not sure what to invest in, skip the dinner seminar and hire a fee-only financial planner—which means someone who does not receive commissions for selling products.
7. Ignore Headlines Like “10 Stocks to Buy Now”
These types of headlines make good headlines, not good investments. Stock picking is not the way most people achieve financial success. Boring stuff, like saving a portion of every paycheck, matters far more than stock picking.
8. Focus on the Future, Not the Past
Too many people invest by looking backward. They look at last year’s results and put their money in things that did well last year. Although this is the worst way to pick investments, some people will still do it. Instead, focus on where you want to be in the future, and consider what long-term strategy is most likely to get you there. Investing money across multiple asset classes, like large cap, small cap, international, emerging markets, real estate funds, etc., is much better than moving money into what did well last year.
The great thing about these eight ways to achieve greater financial success is they’re easy and anyone can do them. You don’t have to guess about the future or take big risks with your money. All you have to do is make a plan, follow through, and take action.