Congress has recently proposed new tax laws that, among other changes, would eliminate the Backdoor Roth IRA strategy beginning in 2022. We don’t know for sure whether these proposals will be passed into law, but this provision in particular seems likely.

What does that mean for you? If you’d like to execute a Backdoor Roth IRA for 2021, or if you need to complete the process for prior years, the smart move is likely to do so before December 31. Otherwise, you may miss out on your last opportunity.

For more on the Backdoor Roth IRA and how it works, you can read the following post: The Backdoor Roth IRA: How High Earners Can Get Tax-Free Money in Retirement.

The same changes, and therefore the same December 31 deadline, would also apply to the Mega Backdoor Roth IRA. This is not a commonly available strategy, but it’s powerful if you can use it. More on that here: The Mega Backdoor Roth IRA.

If you have any questions about how this applies to your personal situation, please feel free to comment here or reach out to me directly at matt@momanddadmoney.com. I’m always happy to help.

The post Last Chance for the Backdoor Roth IRA appeared first on Mom and Dad Money.

We’re closing in on the end of the year, which means it’s almost time for family, friends, travel, stress, fun, and everything else that comes with holiday season.

It’s also a great chance to take stock of your financial situation, reflect on what’s gone well this year, what could be improved, and what you need to do to put yourself in the best situation possible going into next year.

But let’s face it: you don’t want to spend the holidays handling your finances. That’s no fun for anyone.

So instead of waiting until the last minute, and potentially missing some important deadlines, I’d like to help you get a bit of a head start.

Here are 10 moves you can start making right now to improve your financial situation before the end of the year.

1. Review your goals and set new ones

If you set some financial goals at the beginning of the year, now is a good time to check back in on them and ask yourself some questions:

• What’s gone well?
• What hasn’t gone well? Why is that?
• Are these goals still relevant? Do any of them need to be discarded or updated?
• Are there any new goals you’d like to be working towards?
• What are some specific steps you can take to make better progress going forward?

Block some time off in your calendar to review those goals, update them as needed, and set new goals for the coming year. Your life and your circumstances have almost certainly changed over the past 12 months, and your goals should reflect those changes.

In the end, your financial plan can only be as good as the goals you set. Make this review a priority, block the time off in your calendar, and set yourself up for success in the coming year.

Here are three resources that can help with this process:

• A Life-Centered Approach to Setting Financial Goals
• A Counterintuitive Path to Happiness
• The New Family Financial Road Map

2. Maximize your retirement/financial independence savings

The easiest way to reach financial independence as soon as possible is to save more money. Nothing else you do will have as big an impact.

So it makes sense to take stock of how much you’ve already saved this year and whether you should be making any special moves to maximize your contributions to accounts like your 401(k), IRA, and HSA.

There are some limits and deadlines to consider here, so let’s walk through them quickly.

• 401(k) – The most you can contribute to your 401(k) in 2019 is $19,000 and you have until December 31 to do so. Reach out to your HR department if you would like to increase your contributions between now and then.
• IRA – The maximum IRA contribution for 2019 is $6,000, though there are some limits depending on your income. And while you have until April 15 of next year to make those contributions, it’s a good idea to at least have a plan in place now. (Here’s a guide to help you decide the right type of IRA for you: Traditional vs. Roth IRA: The Unconventional Wisdom.
• HSA – Don’t forget about a health savings account, which is quite possibly the best investment account around! A family can contribute up to $7,000 for 2019 while an individual can contribute up to $3,500. Here’s a guide that will help you set one up: How to Find the Best Health Savings Account.
• If you’re self-employed, or even freelancing on the side, think about opening a retirement account through your business. That extra savings can be really powerful.

3. Plan next year’s savings

With both your goals and your savings still top-of-mind, you’re in prime position to make a least a rough savings plan for next year.

Here’s a little cheat sheet you can use to set up automatic contributions that max out each of your tax-advantaged investment accounts:

401(k)

• 2020 annual max: $19,500
• Monthly: $1,625
• Per paycheck (26 paychecks): $750
• Per paycheck (24 paychecks): $812.50

Traditional or Roth IRA

• 2020 annual max: $6,000
• Monthly: $500
• Per paycheck (26 paychecks): $230.77
• Per paycheck (24 paychecks): $250

Health Savings Account

• 2020 annual max: $3,550 individual / $7,100 family
• Monthly: $295.83 / $591.67
• Per paycheck (26 paychecks): $136.54 / $273.08
• Per paycheck (24 paychecks): $147.92 / $295.83

But of course financial independence shouldn’t be your only goal. Back in Step 1 you might have set goals like buying a house, traveling, building an emergency fund, switching to a single income, or starting a business.

Those shorter-term goals are just as important as the long term ones, so make sure to set aside some regular savings for those as well.

4. Optimize your employee benefits

The end of the year is open enrollment season, which means your employer will probably be sending you a big packet of information about your 2019 employee benefit options.

That might sound pretty boring, and it kind of is, but it’s also a big opportunity to make sure you grab every last financial incentive available to you.

You can click here for a complete guide to maximizing open enrollment, but here are a few of the things you might be able to take advantage of:

• Retirement plans – Have there been any new plans introduced? Are there any changes to the old plan? Are you taking full advantage of your employer match?
• Health insurance – Check both your options and (if applicable) your spouse’s options to make sure you’re getting the right coverage for your family’s needs. You may even be able to choose a plan that qualifies you for a health savings account!
• Dental and vision insurance – This can be valuable coverage, especially if you know you’ll need care in the coming year.
• Medical FSA – Money contributed to this account is tax-deductible and can then be used tax-free for medical expenses. Just be cautious because this money is, in many cases at least, use it or lose it. The maximum annual contribution for 2020 is $2,750.
• Dependent care FSA – Money contributed to this account is tax-deductible and can then be used tax-free for childcare expenses. Hey, at least there’s SOME relief from this enormous cost! Though again, this money is use it or lose it so plan carefully. The maximum annual contribution for 2020 is $5,000.
• Life and disability insurance – There are pros and cons to getting this coverage through work, but at the very least it’s good to know what’s available to you so you can make an informed decision.
• Legal services – You may be able to take advantage of heavily discounted legal services, which can range from estate planning, to immigration assistance, to family law.
• Other perks – There’s a whole range of other perks your employer might offer, such as gym membership, transportation reimbursement, education assistance, and many others. Make sure to look through all your options so you can take full advantage of everything that’s available to you.

5. Use any remaining FSA money

One of the tricky parts of a medical FSA is that the money is often use it or lose it. That is, any money that’s still in your account at the end of the year is gone forever.

So, while there’s still time left, check your FSA account balance and think about how you might be able to use it before the end of the year.

Do you need new glasses? Do you have any medical care you’ve been putting off? Maybe your child could use a trip to the dentist?

See if you can find a use for this money before the end of the year so that it doesn’t go to waste.

Quick note: Not all FSA plans are 100% use it or lose it. Some offer a grace period where you’re allowed to use the money for a certain period of time after year end. Others will let you keep up to $500 for next year. Check your specific plan details to see what leeway you’re allowed here.

6. Plan for the holidays

The holidays can be a lot of fun. Time off from work. Time with family. Maybe even some traveling.

They can also be a HUGE money drain. Between gifts, food, plane tickets, hotels, and all the rest, the money you spend during the holidays can throw you way off your other goals, and potentially even leave you with a new pile of debt to handle.

The best way to avoid all of that is to plan ahead.

Make a plan for how much you want to spend. Set a gift budget, a food budget, and a travel budget. Save ahead for the things you know are coming.

I’m all for traveling to see family and spending on things that matter. And the holidays are a great opportunity to do just that.

With a little bit of planning, you can do it in a way that keeps your other goals on track.

7. Rebalance your investments

I like to be pretty hands off with my investments.

As long as you pick a good enough investment strategy, minimize your costs, and automate your savings, you should stop worrying about it and get back to the rest of your life.

But there IS a small amount of regular maintenance that helps keep things on track, and rebalancing your investments is one of those pieces.

Rebalancing is essentially this:

You chose to invest in a particular way with a particular mix of investments. This much money in stocks, that much in bonds, etc.

But over time the markets will move and that mix will naturally change. When the stock market is up, that part of your investment account will increase in value and you’ll have a bigger percentage of your money in stocks than you originally planned. The opposite is true when the stock market is down.

Rebalancing is how you bring everything back in line with your personal goals. It’s simply the process of resetting your investments back to your original plan.

Here’s more detail on what rebalancing is and how to do it: What is Rebalancing and Why is it Important?

Of course, there are also a number of investment options that automate the process of rebalancing so that you don’t have to worry about it. Here’s more on that topic: How to Beat 80% of Investors With 1% of the Effort.

8. Double-check your insurance and estate plan

Life moves fast, and as your circumstances change you may find yourself with new things to protect, or maybe even things that no longer need protection.

Which means it’s a good idea to review your insurance and estate plan from time to time to make sure it’s still covering what you need it to cover, and nothing more.

Here are three things in particular you’ll want to review:

• Life insurance – A change in circumstances, such as a new child, a new house, a windfall, a marriage, or a divorce can significantly change your need for life insurance. If you’ve been through any big changes, you can use this tool to re-evaluate your need for coverage.
• Disability insurance – If you’ve changed jobs or had a significant change in income, you may need to update your coverage to make sure you’re fully protected.
• Estate plan – The same changes that would trigger a review of life insurance should trigger a review of your will and other estate planning documents. This is simply to make sure that your family will always be cared for in the way you want.

9. Review the past year’s income and expenses

If you’ve been tracking your spending for the past year, now is a good time to look at the full year’s worth of information and ask yourself some questions:

• Do any of the numbers surprise you?
• Were there any irregular expenses you hadn’t planned for?
• Did you save for the things you wanted to save for?
• Are there any expenses that would be easy to cut?
• Do you see any opportunities to increase your income?
• Do you have room to put more money towards more enjoyable activities?

There’s nothing like looking at the cold, hard numbers to get a real sense of where your money is going, what you’re prioritizing, and what you’d like to change.

If you haven’t been tracking your spending, now is as good a time as any to get started. I would highly recommend checking out You Need a Budget to help you take control of your income, expenses, and savings.

10. Record your net worth

Your net worth is your single most important financial number for the simple reason that just about every good financial move you make serves to either increase it or protect it.

And that means that tracking your net worth over time will help you gauge whether the financial moves you’re making are actually working. If your net worth is increasing, you’re making progress. If not, it might be time to re-evaluate the decisions you’re making.

So no matter what, recording your net worth now is a good idea. And if you can, compare it to your net worth at the same time last year to see how it’s changed, think about what worked and what didn’t, and use that information to influence your plans for the coming year.

Here’s an article that explains how to do that: The Most Important Financial Number.

What will you do to improve your financial situation?

You certainly don’t have to hit all 10 of these by the end of the year (though it would be great if you did!). That’s a lot to take on.

But as you look at this list, try to find at least 2-3 things that you can commit to handling before December 31, and maybe another 2-3 that you can commit to at the start of next year.

This isn’t about getting EVERYTHING right. It’s about making consistent forward progress one step at a time.

What next step will you take?

The post 10 Financial Moves to Make before the End of the Year appeared first on Mom and Dad Money.

It’s that time of year when people are getting their tax refunds. Maybe you’ve already received yours or maybe, like me, you’re still waiting on it. Or maybe you still need to file your taxes. (If that’s you, get on it! The deadline is April 15.)

Wherever you stand, your tax refund is a good opportunity to make big progress towards one or more of your financial goals.

So, how can you make the most of that money? Below are nine ideas that can help you secure your financial foundation and build towards the future.

By the way, these same ideas apply any time you have a sudden influx of money. It could be a bonus, a gift, some side income, proceeds from a yard sale, an inheritance, or something else.

No matter the source, you can come back to this list whenever you’re unsure how to make that extra money work for you.

1. Start with your personal goals

While there are lots of things you could do with your tax refund, the right move or combination of moves always depends on your personal goals.

So before you do anything, I would start by stepping back and reminding yourself what, exactly, you’re trying to achieve. Why is money important to you? What opportunities do you want it to create for yourself and your family? What kind of life are you trying to build?

If you don’t already know the answers to those questions, try using the following process to get some clarity: A Life-Centered Approach to Setting Financial Goals.

Financial planning is all about creating a happy, healthy life for you and your family, both now and in the future. Reminding yourself exactly what that means to you will help you make better financial decisions.

2. Build an emergency fund

An emergency fund is simply money, sitting in savings, available for the unexpected. And it serves two important purposes:

1. It provides security by making sure there’s cash available for emergencies and other unexpected expenses.
2. It provides the flexibility to do things like change careers, switch to a single income, or start a business because you have the savings to smooth out the inevitable bumps in the road.

Your tax refund is a great opportunity to bolster your emergency fund. Here’s more on how to do that: A Comprehensive Guide to Building Your Emergency Fund.

3. Pay off debt

Using your tax refund to pay off a big chunk of credit card debt, student loans, auto loans, or any other debt all at once can provide a huge boost to your finances.

First of all, it’s a great investment. If you have a credit card that’s charging you 18%, every extra dollar you put towards that debt earns you an immediate and guaranteed 18% return. That’s hard to beat.

Second, it saves you money. Less debt means less interest, which means more money in the bank.

Third, it gets you closer to being free from the financial obligation you have to your lender. Once that debt is gone, you no longer have the obligation to dedicate a set amount of work hours to paying it back, which gives you more freedom to spend your time and your money as you please.

Paying off high-interest debt – which I generally define as any debt with an interest rate of 6% or above – is an especially good move. It’s honestly hard to beat in terms of efficiency and effectiveness.

4. Contribute to an IRA

IRAs are tax-advantaged retirement accounts that you open up on your own, outside of your employer. There are two types:

• Traditional IRA – Your contributions are tax-deductible, the money grows tax-free inside the account, and the withdrawals you make in retirement are taxed.
• Roth IRA – Your contributions are not tax-deductible, but the money still grows tax-free inside the account and you can make tax-free withdrawals in retirement.

There are pros and cons to each type, but the bottom line is that contributing to either one will help you build towards a better financial future.

My wife and I have all our IRAs with Vanguard, though there are plenty of good providers you can use. Just make sure to pay attention to the income and contribution limits before moving forward.

5. Increase your 401(k) contributions

While you can’t directly contribute your tax refund to your 401(k) – since all contributions have to come out of your paycheck – it can still help you increase that contribution without disrupting the rest of your financial needs.

Here’s how to do it:

1. Put your tax refund into a savings account.
2. Divide the amount of your tax refund by the number of months left in the year.
3. Increase your monthly 401(k) contribution by the result you got from Step 2.
4. Withdraw from your savings account as needed to make up for the decrease in take home pay.

As an example, let’s say that you receive a $2,400 tax refund. You can put that money into a savings account and increase your 401(k) contribution by $300 per month starting in May ($2,400 divided by 8, since there are 8 months left in the year). Then you can move $300 per month from your savings account to your checking account, leaving you with the exact same amount of spending money each month even though you’re contributing more to your 401(k).

This is an especially effective strategy if you aren’t yet taking full advantage of your employer match. In that case, you may be able to effectively double your tax return through the combination of your contribution plus the match.

6. Fund future expenses

There are all kinds of things that you may either want or need to spend money on in the near future, and your tax refund could be a good opportunity to fund them.

Maybe you’re trying to save up for a down payment on a house. Or maybe your current home is going to need some upgrades in the near future. Or maybe you’d like to be able to travel to see friends or family.

Any big future expense will be easier to handle with a big infusion of cash.

7. Treat yo’ self

 
If your big goals are already on the right track, then you should absolutely feel free to use at least some of that tax refund to treat yo’ self.

Plan a weekend getaway. Go out for a fancy date night. Buy that espresso machine you’ve always wanted.

Money is supposed to make you happy, after all. So if your financial foundation is already secure and you’re already making good progress towards your most important future goals, go ahead and spend it on something that you’ll enjoy.

8. Pay it forward

As important as it is to focus on the health and happiness of you and your family, there are plenty of other people who could use a helping hand as well.

If you already have enough to meet your family’s needs, you could always consider using your tax refund to support one or more causes you believe in. It’s a great way to do some good in the world, and there’s even scientific evidence that it can increase your own happiness as well.

9. Consider adjusting your withholding

If your tax refund is really large, you could consider adjusting your withholding to have less taken out of your paycheck so that you’re able to put that money to work a little sooner.

From a pure math standpoint, this strategy makes a lot of sense. Simply put, you’re better off earning interest on that money now than you are waiting until next year to get it.

But it’s more complicated from a behavioral standpoint. Because you’re also much better off waiting to get another big windfall next year and doing something productive with it than slowly spending it each month instead.

So if you do decide to adjust your withholding in order to increase your take home pay, just make sure you have a firm plan in place for doing something productive with that extra money. Automating it to a savings account is an easy way put it to work and ensure that it’s helping you reach your goals.

Make the most of it

Wherever you stand right now, your tax refund is a great opportunity to make big progress towards your most important personal and financial goals.

I hope the list above helps you make the most of it. And if you have any questions, please feel free to ask in the comments below. I’m always happy to help!

The post 9 Smart Ways to Use Your Tax Refund appeared first on Mom and Dad Money.

My wife and I bought our first house in the summer of 2017. Before that we had always chosen to rent for the simple reason that renting was both a better financial decision and a better fit for our lifestyle.

Simply put, buying a house is not always better than renting, no matter how many times you hear otherwise. It eventually became the right move for us, but there were a number of key variables that had to align before we got there.

Still, most of my clients would eventually like to buy a house if they haven’t done so already. Owning a home feels more settled. It feels like something you can make your own. And the reality is that that feeling matters when you’re raising a family.

But how do you know if buying a house is the right financial decision for you and your family? Here are seven important questions you can ask yourself to figure it out.

1. Can you put 20% down?

There are a few big reasons why a significant down payment is a good idea:

More flexibility

I place a lot of value on flexibility. Circumstances change, goals change, and new opportunities present themselves all of the time. I want to put my family in a financial position where we can take advantage of those opportunities when they arise.

A 20% down payment gives you more flexibility, simply because you’re taking on less debt than what your house is worth.

Let’s say you buy a house for $300,000 and a year later you get a dream job offer in another city. Good for you!

But… now you need to move, which means you need to sell your house. And unfortunately the housing market is in a bit of a slump and your house will only sell for around $270,000.

If you hadn’t put any money down, you’d be stuck. You would still owe close to $300,000 on your mortgage, and the proceeds from selling would only cover $270,000 of that. So you would either have to come up with the other $30,000 yourself, default on the loan, or skip the job offer and stay put.

On the other hand, if you had put 20% down up front, you would only owe $240,000. Which would give you the OPTION of selling your house and using the proceeds to completely pay off your mortgage.

Good financial planning is about enabling you to take advantage of exciting life opportunities. A down payment gives you more flexibility to do just that.

Lower interest rate

The more you put down, the less risky you appear in the eyes of a lender.

That leads to a lower interest rate on your mortgage, which means a lower monthly bill and less money spent over the life of the loan.

Avoid PMI

If you don’t put at least 20% down, you will likely have to pay for private mortgage insurance (PMI). This insurance would reimburse your lender if you ever defaulted on your loan, which is considered more likely with a smaller down payment.

PMI is simply an extra fee that adds to the long-term cost of owning your home. It’s better to avoid it if you can.

2. Do you have additional savings for maintenance and furnishings?

After you’ve put that 20% down, it’s likely that you’ll want to spend some money to get your new house in the shape you want.

There are almost always at least a few repairs or upgrades to handle. From little things like painting walls and fixing cracked tiles, to bigger things like ripping out carpet and replacing windows.

Then there’s new furniture and new decorations to buy to make that house yours.

And of course, the maintenance doesn’t stop there. There will always be both little and big things needed to keep your house in good shape.

All of that can add up quickly, which makes it a good idea to have the money set aside ahead of time AND to have a plan for handling ongoing repairs.

3. Will you still have a full emergency fund?

After all of that, what will your emergency fund look like? Will it still be as big as it needs to be?

Owning a home increases the importance of an emergency fund, since there are more things that could go wrong that you would be responsible for.

You’ll want to make sure that you have plenty of savings to cover whatever comes your way, even after handling the down payment and maintenance costs.

4. Are your other financial priorities in line?

No financial decision should be made in isolation. Your personal financial plan is a collection of many different pieces, all of which should work together to help you reach your goals.

So it’s a good idea to think about this house purchase in the context of your other financial goals and responsibilities.

For example, do you already have the right insurance in place to protect your family? Insurance is arguably even more important once you own a home because you have more financial assets to protect.

Are you already on track for financial independence? Will you be able to stay on track once you add the house payment to your budget?

What does your debt situation look like? Do you have a plan for paying it back?

What are your other big life goals? How will those be affected by this house purchase?

The big question here is really this: does buying a house help or hurt your ability to reach your biggest personal and financial goals?

5. How long will you live there?

Even if you have the savings to handle everything with ease AND keep your other financial priorities on track, there’s still the question of whether buying a house is actually a better financial decision than renting.

While a house is almost never a good investment, it CAN save you money over the long-term. With the key word there being long-term.

The longer you plan on staying in one place, the more likely it is that buying will be a better financial decision than renting.

You can run the numbers for yourself here to see how it plays out in your specific situation.

6. Will the location save you money?

A good location can not only make your life more enjoyable and less stressful, it can actually save you money.

If you’re close to work, you can save on commuting costs, pay for fewer hours of childcare, spend less time hating traffic, and spend more time on things you actually enjoy.

If you’re close to things like the grocery store, schools, and parks, all of those activities get a lot easier and a lot more enjoyable.

And if you can walk or bike to any of those places, even better!

Knowing the ins and outs of location is a big reason why I think it’s a good idea to rent for at least a little while anytime you move somewhere new. You’ll learn a lot about why you would or wouldn’t want to live in specific neighborhoods by actually being there.

7. Does it NOT have the features you don’t want?

One of the biggest reasons people spend more than they need to on big purchases like a house or a car is the never-ending list of potential features.

There is ALWAYS a long list of cool things you’ve never considered before, but that you NEED to have as soon as the realtor mentions them. And they all cost money.

That’s why it’s so important to make a list ahead of time with both the features you DO care about and the features you DON’T care about. That will make it a lot easier to get what you want without paying for what you don’t.

Buying a house is a BIG financial commitment!

If all of that seems like a lot, well, that’s because it is! Buying a house is, for many people, far and away the biggest financial decision they will ever make.

So it makes sense to make sure that you’re really ready for it. A good buying decision can not only provide a happy place to call home, but save you a lot of money over the years. A bad one can add a lot of stress and make it harder to reach your biggest financial goals.

In our case, we decided to pass on buying for a long time. We simply couldn’t answer “yes” to enough of the questions above for it to make sense.

So don’t worry if you find yourself in the same situation. You’re not throwing your money away by renting, and by being patient and waiting until it’s really the right time, you’re setting yourself up to have a much stronger financial foundation in place when you do eventually buy a house.

The post 7 Financial Questions to Ask Yourself Before Buying a House appeared first on Mom and Dad Money.

Just about everyone who doles out financial advice — myself included — encourages you to start by setting some goals. After all, how can you make good decisions if you don’t first know where you want to go?

The truth is that your goals are incredibly important. They shape your decisions. They drive your behavior. They define how you view success and failure. And over time they end up determining the kind of life you build for yourself and your family.

That’s some pretty heavy stuff.

So how do you know whether you’re setting the right goals? Goals that you’ll follow through on. Goals that, once achieved, will actually make you feel happy. Or secure. Or fulfilled.

There’s one good way to find out. All you have to do is ask “Why?”.

Why do we fail at our goals?

It’s easy to set a goal and never follow through on it.

I do it. You do it. We all do it all the time.

Why does it happen?

More often than not, it’s because we don’t really know the “Why” behind the goal. We don’t know why it’s important to us or why it will bring us closer to the life we want.

And without that “Why”, we don’t have a compelling reason to do the hard work necessary to follow through.

It may very well be that the goal actually isn’t all that important to us. We set it mostly because we felt like we were “supposed to”, not because it truly mattered to us.

But in a lot of cases, that goal is important to us and it will improve our life in a meaningful way. We just haven’t made the effort to connect those dots so we can truly understand why that’s true.

Either way, the goal ends up just sitting there, gathering dust and eventually floating away as we go about our life just as it was before.

“Why” matters

Understanding the “Why” behind each goal you set is the difference between setting goals that matter and setting goals that don’t.

It’s the difference between a goal you follow-through on and one you don’t.

It’s the difference between a goal that makes your life happier, and one that doesn’t.

It’s the difference between a goal you pursue unfailingly because it’s a part of your life’s mission, and one that feels like just another item on your to-do list.

It’s the difference between a goal you actually care about, and one that’s just kind of there because it’s “supposed to be”.

And in the end, it’s the difference between achieving real financial security and real financial freedom, or simply creating a mirage of each.

What’s your “Why”?

If you want to set meaningful financial goals, I would encourage you to look at each one and ask yourself “Why?”:

• Why are you setting this goal?
• Why is it important to you?
• Why will it help you create the life you want for yourself and your family?

Keep asking why and eventually you’ll get to one of two places with each goal you’ve set.

Either you’ll run out of answers, which is probably a good sign that it’s not an important goal. Time to move on to the next one.

Or you’ll get to an answer that resonates deeply with your personal values. You’ll see that this goal is the difference between building the life you want to live, or not. Simple as that.

If you can set goals that have that burning “Why” behind them, and avoid the ones that don’t, not only will you accomplish a lot more, but those accomplishments actually make you feel happier, more fulfilled, and more secure.

Give your money a purpose

Personal finance isn’t really about money. It isn’t a checklist of to-dos where you can cross everything off and proclaim yourself “successful”.

It doesn’t work like that.

Personal finance is really about the life you want for yourself and your family. It’s about what makes you happy, what you value, and what you enjoy.

Money is just a tool that, when used well, can make those things possible.

Asking “Why?” for every financial goal you set will help you keep your money aligned with your real priorities. It will help ensure that your financial decisions are actually leading to a happier life, rather than simply checking off boxes or fulfilling someone else’s dream.

And that’s what it’s really all about.

So, what’s your “Why”? Leave a comment down below to let me know!

The post What’s Your “Why”? appeared first on Mom and Dad Money.

How will you improve your financial situation this year?

My guess is that you already have some ideas about what you’d like to improve. If not, you can use The New Family Financial Road Map to figure out what to prioritize first.

But either way, knowing what you want to do is just the first step. And many people never take the next step for one simple reason.

Figuring out HOW to do it is confusing.

There are so many banks, investment platforms, insurance companies, apps, websites, and everything else that it can be hard to make a decision and move forward. You get stuck in analysis paralysis, where the fear of making the wrong decision prevents you from doing anything at all.

This post is going to help you avoid that.

Below are 28 tools and resources that will help you make the most of your money in 2019. All of them are either things that I personally use and love, or that I’ve had enough experience with and heard enough good things about that I am happy to recommend them.

I’ve organized them by major category too, so you can skip to exactly the topics you want to focus on and get started right away.

No more analysis paralysis. Now you can focus on taking action and improving your financial situation.

Quick note: I don’t get paid to recommend ANY of these tools and resources. Not a single one. These are simply the things that I think will genuinely help you make better financial decisions.

Budgeting/Tracking your spending

You don’t have to make a budget in the normal sense of the word. You really don’t. In fact, I’ve long advocated for an non-traditional approach to budgeting.

But you do need to set up some kind of system that puts you in control of the money coming into your possession, allowing you to direct it towards the goals that matter most to you and your family.

A great first step is simply tracking your spending so that you can see how much money is coming in each month and where it’s going. That gives you the baseline information you need to understand where you are now, what you can do to improve, and track your progress as you move forward.

Here are a few tools you can use to do it.

1. You Need a Budget (YNAB) – I’ve been using YNAB myself for almost a year now and I love it so much that I buy it for all of my Financial Foundation clients. It’s hands-down the best system I’ve found for tracking your spending and proactively planning for both future expenses and savings goals. It costs $83.99 per year, but there’s a 34-day free trial and in any case the cost is well worth it. My personal finances are in much better shape because of YNAB.

2. Mint – This is the tool I used for years before switching to YNAB. It’s not as good at helping you proactively plan, but it’s free, relatively easy to use, and good at tracking your spending. This article details how I used to use it: How I Track My Spending.

3. Pre-Made Templates – If you prefer to do things by hand, my friend J. Money at Budgets Are Sexy has compiled a great list of free budgeting templates for you.

Banking

A good bank makes your life a whole lot easier. And by good, I mean a bank with minimal fees, a great online interface, a great mobile app, competitive interest rates, excellent customer service, and easy processes for depositing and withdrawing money.

Here are some of my favorites.

4. Ally Bank – This is the bank I use and I absolutely love them. Everything is easy, the customer service is great, and they have some of the best interest rates around. Hard to beat.

5. Capital One – I haven’t used them personally, but they have all the features I would look for in a great bank and I’ve heard a lot of good things about them from friends and clients.

6. Local Credit Unions – I’m a big fan of online banks, but if you need access to a physical branch I would generally look for a local credit union. Credit unions are owned by their customers and therefore often have fewer fees, better interest rates, better customer service, and offer better loans than bigger banks.

Investing

Investing doesn’t have to be complicated or overwhelming. You can get started right now creating an investment plan that helps you build towards financial independence, no matter how much money you have.

Here are some of my favorite investment companies and resources.

7. Vanguard – Vanguard is the cream of the crop when it comes to investment companies, offering top-notch investment options with rock-bottom fees. I use them for my personal investments and I typically end up recommending them to my clients as well.

8. Betterment – Automated investment platforms, or “robo-advisors” as they’re often called, have been growing in popularity. Although I would still generally prefer Vanguard in most situations, Betterment is my favorite of these automated platforms because of their investment philosophy and what seems like a strong commitment to doing right by their customers.

9. Investing Made Simple – If you’d like some help figuring out how to invest the right way, this guide is for you. It’s action-oriented, walking you through every major investment decision you have to make and showing you exactly how to make them. You’ll walk away knowing how much to save, which accounts to use, and how to choose the right investments.

Paying off debt

Along with investing, getting to debt-free is the biggest factor in reaching financial independence. Here are a couple of tools that will help you do it.

10. Vertex Debt Reduction Calculator – This is a free tool that’s easy to use and creates a powerful repayment plan. I wrote about my favorite features here: A Simple Tool for Creating a Killer Debt Repayment Plan.

11. The National Foundation for Credit Counseling – If you’re really struggling with your debt situation, I would check out the NFCC. It’s a non-profit organization dedicated to helping consumers improve their financial situation, without the scamminess or the ridiculous fees of most other credit counseling organizations.

Student loans

Student loans are really a special kind of debt with their own set of rules and best practices. These resources will help you get organized, understand your options, and pay them off as quickly as possibly.

12. StudentAid.ed.gov – I’ve used this site many times over the years when I’ve had questions about student loans. It’s a great resource with tons of helpful information.

13. National Student Loan Data System – This is the definitive source for up-to-date information on your federal student loans. This information is key if you want to pay your loans off as quickly as possible.

14. AnnualCreditReport.com – Your credit report is where you’ll find current information about your private student loans, as well as any other debt you might have. And this is the one site that really, truly, lets you get it for free.

15. Student Loan Organizer – Those last two resources give you a TON of information and you need a way to organize it all. So I created this simple spreadsheet to help you do it. If you’d like some guidance on how to use it, refer to this post: How to Organize Your Student Loans.

16. VIN Foundation Student Loan Repayment Simulator – This is the best tool I’ve found for comparing different repayment options and deciding which one is best for your specific situation.

Life insurance

As soon as you start a family, life insurance is a must. These tools will help you get the coverage you need at a cost you can afford.

17. Life Insurance Needs Calculator – I could never find a life insurance needs calculator I liked, so I created my own. This is the same one I use with my clients and it will tell you exactly how much life insurance to get.

18. Term4sale.com – This site provides accurate life insurance quotes without collecting any personal information. It’s a great way to do the research yourself rather than relying on an insurance agent who may or may not have your best interests at heart.

19. PolicyGenius – This is a newer company that I like a lot. They provide pretty much the same quotes as term4sale, but they have a little more guidance that may be helpful for some people.

Online communities

I’ve found online communities to be incredibly helpful in a number of areas, but particularly when it comes to financial questions. It’s so convenient to have a place you can ask your specific, personal questions and get real feedback from real people.

Here are two communities I’ve used over the years and have found to be really helpful.

20. Bogleheads – Their forum is amazing, both for asking questions and for looking back through previous threads. It’s a little more focused on investing than the other two communities here, but all financial questions are welcome. They also have a wiki with a ton of really useful information.

21. BabyCenter Family Finances – I love this community. Tons of really smart people, and it’s specifically focused on the financial issues you face as a parent.

Financial planners

If you’re looking for personalized advice and guidance, you may want to work with a fee-only financial planner. A good planner will take the time to understand your current financial situation and your biggest personal goals, and will help you create and implement a plan for reaching them.

Here are a few ways to find the right financial planner for you.

22. Me! – Hey, this is what I do! I specialize in working with new parents who want to take control of their money so they can take care of their families. You can learn more about the services I offer here.

23. XY Planning Network – This is an organization of fee-only financial planners who specialize in working with Gen X and Gen Y clients. A lot of these people are personal friends and just about every member I’ve met genuinely has their clients’ best interests at heart.

24. NAPFA – If you’re nearing retirement, NAPFA may be a better place to look for a financial planner. It’s another fee-only network and it’s full of great people.

25. Garrett Planning Network – Another great organization primarily targeting people nearing retirement. While most NAPFA members charge based on ongoing investment management, Garrett planners all offer hourly services that may be better for people looking for more limited engagements.

Miscellaneous

Here are three more resources I love that don’t really fit into any of the categories above.

26. NY Times Buy vs. Rent Calculator – If you’re trying to decide whether to rent or buy a house, this tool is a must. It helps you run all the numbers to figure out just how long it will take for buying a house to come out ahead.

27. Brunch and Budget Podcast – My favorite financial podcast by far. Pam and Dyalekt are funny and entertaining and I learn something new every time I tune in.

28. Republic Wireless – I’ve been using Republic Wireless for cell phone service for a few years now and I absolutely love them. My wife actually switched over recently as well and loves them too. We’ve saved a ton of money using them and the service has been great.

Get Started!

When it comes to improving your financial situation, you’re better off taking ANY step forward than worrying about whether you’re making the absolute best move possible.

The tools and resources above are all great and will all move you in the right direction. Pick the ones you need and get started now.

And if you’d like some personal guidance, please don’t hesitate to schedule a Jump Start Session with me. It’s pay-what-you-want and you’ll get a personalized action plan.

The post 28 Tools and Resources to Help You Make the Most of Your Money in 2019 appeared first on Mom and Dad Money.