2020 is your year. YOUR YEAR! This is the year you finally take control of your finances, pay off more debt than ever, and increase your net worth by a multiple that makes your eyes pop.
While managing your money can mostly feel like trying to put out a dozen fires at once, the truth is there are some little tweaks you can make to smooth out the whole year. Below is a list of small tasks with big impacts!
Get a $5,000 raise
You’ll have one of two opportunities to negotiate a higher salary for yourself in 2020: an annual review at your current employer or when you are hired for a new job at a different employer.
Asking for more money is a deeply uncomfortable conversation, but the payoff is huge. Are you willing to be uncomfortable for 20 minutes in order to get paid thousands of dollars for the same job? The only good answer to that question is yes.
If you’ve never asked for a raise before, we have some tips on how to negotiate your salary here.
Start investing in the stock market
Investing in the stock market is the only way to build lifetime financial security. I’ll say it again just so you can be sure: investing in the stock market is the only way to build lifetime financial security. There are a few different ways to do it!
Open an account with a robo-advisor
If you have no idea what investing in the stock market entails and you don’t really want to learn (hey, we don’t all need to know everything about finance) why not let someone else do the legwork for you? Wealthsimple will invest in the stock market on your behalf, and you’ll reap the rewards.
All you need to do to get started is open account and start contributing. Why not deposit $100 right now, then set up a monthly contribution for the rest of the year? Doing the right thing for your future self has never been so easy.
Start a self-directed investing account
On the other hand, maybe you really do feel like becoming a financial nerd in the new year. If you want to try your hand at building your own portfolio, or you just want a place to make some “fun” investments while the rest of your net worth rests safely with a robo-advisor, why not open a self-directed brokerage account with Questrade?
If you don’t know what you’re doing, you’re not investing: you’re gambling. Questrade is definitely a more advanced product, so if you’re just dipping your toes in the stock market, stick with Wealthsimple.
Do the all the adulting financial tasks you’ve been ignoring
Do you have life insurance? Do you have a will? There’s a lot of grown-up financial must-haves that can seem tedious and intimidating to put together. Unlike paying off credit card debt or saving money, they don’t seem as urgent as other financial tasks. But they’re definitely as important!
Your income is your most important financial asset. You need to protect it, and the way to do that is through insurance. Thankfully, new fintech brands have finally made responsibility painless.
Finally get a will
You can set up a will with Willful in only a few minutes for less than $200. Not only will this allow you to have a say in how and who your assets are distributed after your death, but it also includes a medical directive in case you are not able to advocate for yourself. While grappling with your own mortality might send you into an existential crisis, we still recommend getting your affairs in order.
Sign up for adequate life insurance coverage
You can get life insurance coverage from PolicyMe with only a few clicks. Life insurance is especially important if you have a spouse and/or dependents who are counting on your income. Grief is enough of a burden for a family to bear, so the kindest thing you can do is avoid adding financial stress to the mix.
Regularly check your credit score and credit report
While we’re here, now is also a good time to start tracking your credit score if you aren’t already. Borrowell will provide you with a monthly credit score and credit report absolutely free. See? Organizing your money in 2020 is as simple as signing up for things once and letting fintech take care of the rest.
Build a cash cushion that will actually protect you in times of need
There are 3 Emergency Funds you need. All of them can be started with as little as $20. One of them is actually only $20. Here’s what I want you to do to protect yourself in 2020:
Keep an “Emergency Twenty” in your wallet
Your Emergency Twenty is a $20 bill you keep in your wallet for unexpected small expenses: lunch with a coworker, supporting a friend’s fundraiser or getting a taxi home when you’re stranded on a night out. It can be hard not to spend this money, so tuck it away in a zippered pocket so you don’t see it every time you reach for your debit card.
Your Emergency $20 is meant to get you out of a small bind (usually avoiding some sort of social faux pas) should the need arise. If you use it, you must immediately replace it the next day.
Start building a small stash of cash in your home
Almost our entire financial lives are conducted digitally now. Very few people carry any significant amounts of cash, myself included. But there is one place you should keep a few hundred dollars: your home.
You should have anywhere from $500 to $2,000 in cash on hand. If that seems crazy, try to imagine some situations where it could really help you: an evacuation due to a natural disaster. It doesn’t even have to be that catastrophic, maybe one day the pizza guy just won’t have a debit machine on hand or all of your bank’s ATMs are down. Whatever the reason, you should have a small amount of cash on hand in your home.
Building this cash cushion is as easy as setting aside a $20 bill each month. I often ask for $20 cash back from the cashier on my first grocery trip every month. I add the $20 to my stash, and it ends up tracked in my budget as a household expense. If you start tucking a $20-bill away every month, you’ll have $240 on hand by the end of 2020.
$3,000+ saved in a high-interest savings account as an Emergency Fund
Finally, you want to be putting $20 per week into a high-interest savings account to build your true Emergency Fund. This is the cash cushion that’s going to help you with major unexpected expenses: job loss, disability, illness, major car or home repairs, and so on.
The more money you have set aside for catastrophe, the better. But I promise $20 per week is more than enough to get started. If you start setting aside $20 each week now, you’ll save over $1,000 by the end of the year.
Imagine sipping cocktails next New Year’s Eve with over $1,000 in the bank for the unexpected, an extra couple hundred dollars at home if you need, and $20 in your wallet to get you home that night if you can’t get an Uber. Financial security has never tasted so sweet.
Don’t forget to celebrate your wins along the way
Managing your money is a lifetime endeavor, so make sure you see it that way. Your main goal is doing your best each year so that every subsequent year your net worth goes up and your financial stress goes down!
If you become overwhelmed trying to focus on everything, step back and just do one of the tasks above. Every step counts! And today is the first day of a brand new year of good money.
My TFSA and RRSP are maxed out and I have a large amount in a non-registered account invested in ETFs. I don’t own a car or a house. I don’t think I’ll buy a house until I get married and I’m not even dating anyone – hence why I don’t know when I will buy a house. But I think I should still set aside money for a future down payment, so I should have it in bonds or a GIC. So my problem is, I have trouble deciding how much of my money should be “dedicated” for a future down payment and how much should be set aside for retirement, if that makes sense. Do you have any suggestions or blog posts/articles that could point me in the right direction? Thanks!