Like exercise or diligent flossing, good financial habits are the unsung heroes of personal financial success. Small steps, like saving regularly or putting extra payments toward debt, can help accomplish your larger goals.
Here are six steps you can take in 2020:
1. Get out of debt and save more
Consider two common strategies for tackling debt.
The snowball method
—
Start with your
lowest balance loan
, and pay it off as quickly as possible. Use that freed-up money to pay off the next lowest balance. As the freed-up money snowball gets bigger, you'll have more available to pay off loans.
The avalanche method
—
Start with the
highest interest rate loan
. After you pay it off, you can put those payments toward the loan with the next highest interest rate. This method saves the most money in the long run.
2. Manage taxes
You may have opportunities to save money on taxes,
now or in the future. Consider reducing income taxes this year by saving in tax-advantaged accounts like a traditional IRA or a 401(k).
3. Catch up on retirement savings
Once you're over age 50, you get the opportunity to start making catch-up contributions to your retirement accounts.
In 2020 you'll be able to save $19,500 in a workplace savings account like a 401(k). If you're over age 50, you can save an extra $6,500.
The IRA contribution limit in 2020 will be $6,000—plus $1,000 for catch-up contributions if you're over age 50.
4. Save for health care expenses in retirement
Health savings accounts (HSAs) can help you save to pay for qualified medical expenses, now and in retirement.
5. Revisit your real estate strategy
If you want to consider using home equity to pay expenses in retirement, your options include a reverse mortgage and a home equity line of credit. But perhaps the most common approaches to reducing your housing expenses are downsizing to a smaller home in the same area, or relocating to a less expensive area, or combining elements of both—relocating to a smaller home in a less expensive area.
6. Review your investment mix
If it's been some time since you reviewed your investments, now may be the time. It may be an opportunity to see if your investments still line up with your ability to withstand market volatility and your time frame.
Read the full story from Fidelity
here
.
