7 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?
If you want financial success in 2020, there are some real actions you can take to reach it. They all boil down to getting smarter about your spending, saving, and investment choices.
1. Create 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 can be a powerful insight, and it can help you create realistic savings goals. The Consumer Financial Protection Bureau offers a free Income Tracker, Spending Tracker, Bill Calendar, and Budget Worksheet to help you get started.
2. Raise Your 401(k) or IRA Contributions
If you already have a 401(k) or IRA plan, then consider increasing your contributions now. Even if you just increase them by 1%, that's progress toward your goals. And next time you get a raise, you can consider increasing your retirement contribution a bit too.
If your workplace offers a 401(k) plan, then be sure you're contributing. And if the company offers a match, make sure you're contributing enough to meet it. If you don’t have a 401(k), then consider opening an IRA. You can do this easily online through companies like Vanguard or T. Rowe Price.
3. Get Better at Your Career
The best way to have job security and make more money is to become better at what you do for a living—your career. Pay attention at work. Look for ways to contribute. Be the one who gets things done. Find ways to collaborate with your co-workers. Set short-term and long-term goals. All of these actions can pay off in promotions and raises.
4. Learn How to Be a Boring Investor
Famed economist Paul Samuelson said, “Investing should be dull. It shouldn't be exciting. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas.”
One strategy is to 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.
New to investing? The U.S. Securities and Exchange Commission's Investor.gov website offers many free resources aimed at helping new investors make informed choices.
5. 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.
6. Ignore Headlines Like “10 Stocks to Buy Now”
This may seem like an appealing headline, but that doesn't mean it points to good investments. Keep in mind that the market moves happening today are not necessarily relevant to your long-term goals. Stock picking is not the way most people achieve financial success. Actions like saving a portion of every paycheck usually make a much bigger difference.
7. 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. This is not the best way to pick investments. 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 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 and follow through.