Put on those comfy clothes . . .

And start hunkering down for a year-end assessment. The end of the year is a fine time to do the following financial housekeeping tasks that put you in the right frame of mind to tackle a new year. Make this last month of the year count (before you blow it all shopping)!

1. Rebalance Your 401Ks

This might be a good time to rebalance your retirement accounts if you haven’t done this annual ritual. Today I helped a friend, Analise*, a 42-year old neonatal nurse, with her retirement accounts. We talked about investing over Friendsgiving early last month and she said she had no idea how her 401K was invested.

It was invested in what I call the “Shotgun approach.” A spray of percentages spread thinly through all the options, with little rhyme or reason. Her account categories looked like this:

U.S. Large Company Growth 6%
U.S. Small Company Value 5%
Energy 4%
U.S. Large Company Value 5%
Inflation Protection 5%
Emerging Markets 11%
U.S. Large Company Index 12%
International 26%
Bond 20%
U.S. Small Company Growth 5%

Let’s break it down. Analise has 37% in International (emerging markets is also international), but only 24% in large U.S. companies. She has 10% in small U.S., and 31% in bonds. It’s a bit wonky because International is risky and bonds are laggish. U.S. did great this year and so she probably missed out on some good gains. It’s diverse enough that nothing is fatal, better to have investments that need rearranged than no investments at all.

Without seeing the actual funds, I told her I would probably do: U.S. Large Company Index 55-60%, U.S. Small Company Growth 10%, Bond 17-20%, Energy 0-4%, International 10-12%, Emerging Markets 0-4%. I think that’s a cleaner mix that will produce healthy results and keep decent pace with the S&P 500.

2. Up Your Contribution

If you’re not carrying consumer debt (and if you are, get laser focused on getting it paid off), I recommend upping your contribution by at least 2%. You won’t notice, but you’ll build momentum faster. The best goal is to max out a Roth for 2019 and 2020 and/or your 401K.

3. Review Your Subscriptions and Spending

Review your typical monthly spending. Hopefully you have a written spending plan every month–a budget, and you can quickly review how you’re spending your money every month. Did you forget to budget something like car insurance or homeowner’s insurance and the bi annual bill caught you off guard? If so, break it down and make sure you’re moving a portion to savings each month so you’re ready for big bills.

Watch subscriptions. If you have Hulu and Netflix, but only watch Hulu, cancel Netflix for a few months. Or vice versa. Check your statements for any recurring charges that you no longer need. Or if you need it, see how much you can save by paying annually versus monthly. Sometimes the savings is 20-30%.

Do you really need Prime? Here’s another sneaky charge that encourages impromptu shopping. Plus, if you’re not getting “free shipping” you can often find the product cheaper from other Amazon sellers, even with the shipping. Amazon is a good item to cut the cord on if you’re trying to spend less and save more. Staying out of the mall and Target is another vital tactic for saving.

4. Set Your 2020 Financial Fitness Goals

Year end is a great time to assess spending, plan for upcoming needs and wants, and set an intention for your money in 2020. This is best done by reviewing the current year. My goal for 2020 is to replenish our emergency fund. We had some unexpected expenses come up this past year, so my first priority is getting that back up to 6-8 months living expenses, which is where we feel best as a couple. Depending on how secure and predictable your job is, you could lower it to 3-6 months of living expenses (not income).

I also want to save money in a vacation fund to take the whole family to New York City June 2021. This Christmas it’s a 7-day cruise down the Mexican Riviera, which our girls can’t stop talking about. We told them it’s their whole Christmas [present], but I’m going to throw in a Wii dance game, PJs and some make-up to open on the cruise ship Christmas morning. I’m not a total monster.

5. Recruit a Friend

Money planning is always more fun with a partner or accountability buddy. Every Wednesday before Thanksgiving, the same gals at work would get together with our Morningstar reviews of our 457 mutual fund options (401K), their categories (large, mid, small, bonds, etc.), and rearrange our investments or simply rebalance. We all chose our percentages differently, but it was fun to weed out the losers when compared apples to apples. Or dump the ones with high fees when we finally started paying attention.

The most rewarding was getting our extreme saver friend, Starry*, to invest in something more aggressive than the guaranteed 4% return. She was 32 years old. After the first year she was so pleased with the results she was the most enthusiastic about our annual review. Another friend, Alana*, finally ventured out of the underperforming Target fund (“Target fund 2035”). I don’t know why, but Target funds that our based on your anticipated retirement date tend to be underperforming losers with higher costs. I don’t like them. Alana is also happier with her performance.

A Word of Caution

Markets dip and occasionally take a nose dive. Don’t touch your money during these dives. If anything, jump in and buy more. Or do nothing. Stop looking and do anything else but obsess. Alana and I hadn’t talked in a few months. When we finally caught up, she admitted that last December 2018 she was watching the news, saw the markets tanking, was sure the sky was falling . . . it was doom for sure . . .didn’t call me or anyone for a sanity check . . .and SOLD out of all her stock positions.

In January, when it promptly rebounded, she BOUGHT the same funds again. Sold low, bought high. Emotion got the best of her. The news cycle got the best of her. That little round robin cost her at least 20% of her overall portfolio.

On the flip side, a good friend, age 75, called me during that same December 2018 and said, “You said when the market is on fire and people are running out, I should run in, I have a $30,000 CD that just matured and I want to invest.” She was tired of getting 3%. We picked out a couple index funds in Fidelity, 2/3 stocks, 1/3 bonds and today her “running into a burning building” has made her 15.5% on stocks and 7% on bonds. Her average return for the year is 13%.

Instead of a $900 return in a CD on money she doesn’t need anytime soon, she received a $4,000 return.

Same market, two different results. Remember, you don’t “lose money” in the market unless you realize a dip in value by SELLING. The only time you may want to jump ship from a loser is if you’re invested in an individual company’s stock, which I NEVER recommend. If the company goes bankrupt or loses value, that investment can be lost for good. If you’re invested in broad based mutual funds or index funds, just hang on. The only time I’ve lost a t-shirt in the stock market is when I invested in single stocks of companies I’ve worked for. Stupid. Learn from my mistakes. Luckily these losses were $500-$1000. Expensive t-shirt.

*Names changed.
**Remember, none of this is intended to be investment advice. It’s intended to get you thinking and paying attention to your own money, spending, and investing. Be a money boss. You’re the boss. Pay attention because attention and consistency pays off in the long run. xo, Amanda