3 New Money Habits for 2020 (No. 1 Is Forget Budgets!)

It's time to set financially healthy goals for the year. You'll be glad you did.

After recently completing my second half-marathon race in October, I’m mulling my new fitness goals for 2020. At the very least, I’m considering running the same two races as I did in 2019 with the goal of beating my previous time on both courses.

I enjoy setting New Year’s resolutions; it’s a time to get a fresh start not only for the year, but in this case, for an entire decade. Like most people, I also have financial goals for 2020. Through trial and error over the past several years, I’ve found three strategies that have helped my corporate executive and professional clients save money.

I know that the experts are always touting new ways to save in the new year — but these have really worked for me and my family. I’m confident that even choosing one of the three will help you find your financial footing in 2020:

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Forget Budgets – Here’s How to Track Every Dollar Spent.

It’s no surprise that many executives don’t know how they spend all their money. As retirement approaches, most want to know how much they spend for essential needs compared to discretionary items. Making this distinction helps them gauge their ability to retire and the quality of their retirement lifestyle.

One client who wanted to know these answers recently started going through his credit card statements. Before he knew it, his entire weekend was spent combing through months of statements attempting to categorize and spreadsheet his expenses in a post-mortem manner. There is a better way to understand how your money is spent.

Instead of setting a traditional budget, my wife and I create a spreadsheet and a Google Docs form to quickly capture and categorize each purchase in real time from our smartphones. Each transaction takes less than 20 seconds to record. It’s easy to create a Google Sheets file and link it to a Form where you can input your purchases.

Once the data automatically syncs to the spreadsheet, I’m able to sort and analyze it. At the end of each month, my wife and I review how the family money is spent and discuss any changes needed. The simple act of tracking every purchase makes all of us more mindful of our spending and helps avoid impulse purchases.

Automate Savings and Giving.

Prioritize what matters most by automating it. For many years, my wife and I attempted to save and give money to our favorite charities from money left in our accounts at the end of each month. Not surprisingly, there was seldom much money left.

After being disappointed by our lack of progress, we decided to save and make charitable donations before spending. Our charitable giving is automatically deducted on payday, and the amount remaining in the checking account on payday is used to run our household.

We no longer have to worry about capturing any leftovers. Money for our 401(k) retirement savings plan and Health Savings Account (HSA) contributions is taken out of my paycheck. And we’ve set up semi-monthly sweeps of set amounts into vacation and savings accounts for gifts.

All of the money left in our checking account gives us a guilt-free way to spend as we wish because we’ve already done what matters most. After using this method for the past two years, we’ve saved more than we thought we could and more than doubled our prior annual charitable contributions! We didn’t have a shortage of funds before; we just didn’t prioritize our spending properly.

Set Clear Goals.

Retirement is a huge goal, and the amount of money needed to prepare for retirement is equally massive. In my experience, many executives get sticker shock upon seeing how much they need to save for retirement; they can easily become paralyzed instead of motivated.

I’ve helped some clients overcome this obstacle by focusing on bite-sized pieces instead of the entire picture. One couple I advise has substantial income, but very expensive hobbies as well. Instead of telling them to cut out these hobbies, I helped them quantify how much they need to save specifically in this calendar year to be on track to retire at age 60.

In January 2019, we met and I made clear they needed to save $20,000 this year in addition to them both contributing the maximum amount to their 401(k) retirement plans. I was pleasantly surprised to learn from them in October that not only had they already saved the $20,000 for the calendar year, but they planned to sock away even more before year’s end. A specific plan helped bring them clarity and motivation.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Josh Monroe, CFP®, ChFC
Associate Wealth Adviser, CI Brightworth

Josh Monroe is a CERTIFIED FINANCIAL PLANNER™ practitioner and a Chartered Financial Consultant designee who listens actively and plans thoughtfully to help clients achieve their goals. He joined the CI Brightworth team in 2019 as a Financial Planner. Before CI Brightworth, Josh spent eight years at a leading insurance and investment firm in a variety of roles, including compliance and supervision. Josh is passionate about financial planning and making complex concepts easy to understand.