5 money nudges for the holidays
Do you hear that? It’s the not-so-distant sound of street sweepers rumbling through Times Square, sucking up tons of confetti and 2020 novelty sunglasses—the sound of one year ending and another beginning. And not to be a buzzkill, but after all the holiday hubbub, it’ll soon be time to get New Year’s resolution–serious about your finances. (A recent survey found that about two-thirds of these resolutions involve solemn pledges to spend less and save more.)
But what if you could take a few simple steps right now to make January a little less of a fiscal wet blanket? To help you achieve financial clarity—20/20 before we enter 2020, if you will—here are five financial nudges to prevent you from dropping the financial ball before the, er, ball drops.
1. Save for your future self—even if it’s in small amounts. If there’s any “trick” to building up a true nest egg, it’s beginning earlier than you think. Because time is money—thanks to the magic of compound interest—investing small, regular amounts now adds up to a lot more than frantically socking away huge chunks later in your career. So, before the year ends, make sure you’re signed up for your company’s 401(k) and have maxed out the amount you can afford to contribute. If you don’t have access to a 401(k), put as much as you can in an IRA. You have until April 15, 2020, to make your 2019 IRA contribution—but why put it off? While you’re at it, set a calendar alert to put in your IRA money (if you have it) for 2020 on January 1.
2. Get the jump on tax season. I know, W-2s and 1099s don’t start arriving until the beginning of next year. But those are the easy docs to pull together. The tough part is that totally unfun scavenger hunt for receipts. (Sure, you bought a printer back in June, but where—in that paper mound you call the dining room table—is the receipt?) These days, of course, most receipts are saved in our inboxes. If you’re a freelancer, run a search for all your go-to vendors and clients, and start a folder of all the receipts you find. If you take the time to do this now, well before the mad rush of tax season, you’ll probably turn up a lot more deductible expenses.
3. Set it and forget it. I’m not a huge believer in budgets; nobody sticks with them. Instead, set up an automatic savings plan now so that a certain amount is siphoned out of your paycheck and into your savings every payday next year (and beyond).
4. Use it, don’t lose it. Having money go to waste is a terrible feeling—and if you don’t spend every last dollar in your Flexible Spending Account, whatever balance remains will disappear. Check with human resources to find out your company’s deadline to spend (many companies give you until March of the following year) and nudge yourself to use up whatever you have left by then. Make extra payments for your kid’s braces; buy a three-month supply of meds you use regularly; or get a backup pair of reading glasses. (Oh, and if you have no idea what I’m talking about: An FSA is a special account that allows you to spend pre-tax dollars on approved medical, dental, and vision products and services. If you’re in the 25% tax bracket, for instance, you’ll save that much on anything you pay for with your FSA card. Kind of a no-brainer if you have the option. Make sure to set one up once open enrollment period starts next fall.)
And one final nudge…
5. Give to those in need. After all, ’tis the season. Do it for others and for yourself: Research shows that charitable people are happier people. Also, talk to your kids about what you are doing. Further research shows that children whose parents spoke with them about giving were more likely to contribute to causes than kids whose parents gave but didn’t discuss their reasons. And what better time to talk about charity than the holidays?