6 Money Moves for Positive Change in the Coming Year

We can’t deny that bad things sometimes happen in life, but we can learn to be more resilient by focusing on those things we can control and by taking action. Here are six money moves to consider making right now.

1. Be prepared. There’s an old saying: “Whatever gets measured, gets managed.” One thing to manage is a pot of cash to cover emergencies. Three to six months’ worth of emergency savings is ideal—three months for a two-income family and six months for a single-income family. This has to be a priority because emergencies happen. I like RCU’s Build Your Own Savings Account

   . It lets you monitor your progress to the goal you set for yourself. Start funding the account with automatic transfers of whatever size you can afford on a regular basis.
2. Assess and adjust. Our spending is very different than it was last year at this time. Restaurant, entertainment, travel, and transportation spending are way down, so you can save a little more on a consistent basis. We’ve learned what we really value and what we can live without. And there are savings to be had in maintaining some of the changes we made. Look at subscriptions too. Because we’ve been spending so much time at home, we know which ones we actually use and which ones we don’t. It’s time to cancel the ones we’re not using.
3. Build good credit habits. To establish good credit, do these things on a regular basis:
   • Monitor your credit. If you have a loan or credit card with RCU, you receive your free credit score in online and mobile banking, which is updated quarterly. And keep an eye on your credit report. One-fifth of all credit reports have errors, and some of those errors are bad enough to drag down your score. If you find an error, file a report to have it corrected, and that bureau has 30 to 45 days to get back to you.
   • Make sure you pay your bills on time, every time.
   • Keep an eye on your credit utilization. That’s the percentage of the credit limit you have that you’re actually using. It’s best for your credit score to keep it under 30%.
   • Consider freezing your credit for a period of time.
4. Look at your investment strategy. Make sure the strategy is still appropriate for you and the amount of risk you want to take in your life. By the time you’re 30, aim to have 1x your annual income set aside for retirement. At 40, 3x; at 50, 6x; at 60, 8x; and by the time you retire, 10x. If you haven’t started stashing money away yet for your future, these numbers may look unattainable. But if you can get to the point where you’re saving 15% a year, you’ll see those numbers are absolutely within reach. The point of that retirement stash is to cover about 45% of your pre-retirement income in retirement. The rest will come from Social Security to get you to a replacement rate of income that you should be able to comfortably live on.
5. Automate. Automation is the magic that makes 401k plans and other work-based retirement plans work. The money goes into your account automatically, and because you don’t see it in your paycheck, you don’t spend it. The key is to take this magic and apply it in other places of your life. Automate contributions to IRAs, health savings accounts, and 529 college savings plans. Put as many bills as you can on automatic pilot so you don’t pay late.
6. Make the best choices you can. When you have to make a financial move you know isn’t optimal, make the best “bad” choice you can. Human beings have two biases that can hurt us financially. One is a recency bias. We tend to think whatever just happened will happen again soon. The second is a bias toward action. It’s very hard for us to stay still. Combined, these two things can be devastating in a volatile market. If the markets drop several hundred points in a day, we convince ourselves it will happen again, so we sell. But instead, the markets rally or stand pat. If you’re feeling anxious about the market, it probably won’t work to do nothing. So instead, take a small action to make yourself feel better. Move 5% of your money into cash and see if that’s enough rather than thinking you have to be all out, or all in.

For more information, watch this webinar I recently did for RCU. Redwood Credit Union is the best resource you have, so pick up the phone if you need them and talk to a representative. You’ll learn about all the things available to you like low loan rates and strong deposit rates. There are planning and budgeting tools on the website, financial wellness resources, and a financial counseling service. If you need it, just reach out for help.

Jean Chatzky is CEO of hermoney.com, financial editor of the NBC Today show for 25 years, and the financial ambassador for AARP. She appears frequently on CNN, MSNBC, and has been a reoccurring guest on the Oprah Winfrey Show. A New York Times best-selling author, her latest book is Women With Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful, and Yes, Rich Life You Deserve. Learn more at jeanchatsky.com.