Money Health

How to Create Your 2020 Financial Plan

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As 2019 comes to a close, it’s easy to get caught up in the hustle and bustle of the holidays. But if you want to set yourself up for success next year, take a moment to set up your financial planning checklist. By mapping out your financial plan, you’ll have a better chance of reaching your financial goals.

What is a financial plan?

A financial plan is a map of where all your money goes. It’s like an inventory of your finances. It goes over how much money you’re making, how much money you’re spending, where you can save or adjust your spending, and financial goals for the future.

Consider your assets:

  • Income (like your paycheck)
  • Savings and checking accounts
  • Retirement funds

Review your liabilities:

  • Mortgage payment or rent
  • Car loans or another auto loan
  • Student loans
  • Credit cards
  • Utility bills (like electricity, water)
  • Cellphone and internet bills
  • Other monthly expenses

A plan can also include goals, especially for the upcoming year. For instance:

  • Paying off debt
  • Buying a home
  • Building up emergency savings
  • Increasing your retirement fund
  • Starting or increasing contributions to a college fund
  • Developing or fine-tuning an investment strategy

Since everyone’s financial goals are different, yours may include all or none of these things. The important thing is that you have some idea of how you want your money to work for you.

Cash flow planning

If you lost your job today, how much money would you have to survive this emergency? Almost 80% of Americans are living paycheck-to-paycheck, which means if you don’t get your next one, you could be homeless. And 44% of us can’t cover a $400 emergency expense even if we’re currently working.

Start your cash flow planning by reviewing your assets: how much money you have coming in through things like your paycheck, savings and checking accounts, and even some investment accounts, like your IRA or another retirement fund. 

While your paycheck will go towards many different things, increasing your cash flow should be as much of a priority as paying bills. See how much you need to survive for one month, three months, or even six months. Will those accounts cover your costs for three to six months? If not, consider boosting your emergency savings.

Investment planning

While investing was once seen as something only the wealthy could do, there’s no shortage of opportunities for you to invest with very little money. 

Many robo-advisors will let you open an account with a couple of hundred dollars or as little as $0. You can also try micro-investing through places Acorns, which takes every transaction you make and rolls up the rest to the nearest dollar. The leftover goes into your investment account. There’s no shortage of ways to get started with investing.

If you’re already investing, now is a good time to check up on your portfolio. Ask yourself questions like:

1What are the fees I’m paying?
2Do I need to be more conservative or aggressive?
3How much is my financial planner making off my account?
4Do I need to hire a financial planner?
5Am I contributing enough to my investments?
6Is my portfolio diversified enough?
7Are there any investments that are costing me more than they’re earning?


Not everyone’s investment plans are on the same track, but you should check in with yours to see how it’s doing. You might find that you can leave it as is, or now could be a chance to move it somewhere else so it can earn the most it can.

Insurance planning

Whether you have insurance through your employer or you’ve gotten it through the marketplace, open enrollment is a good chance to check up on your coverage. Think about your health, how often you visit the doctor, and your current costs. Can you pick a plan with a higher deductible so your monthly costs are lower? Or do you need a plan with a lower deductible so your copays aren’t emptying your pockets?

Think about broadening your coverage. Explore dental and vision plans, if you don’t already have them. Ask your current doctors about your regular costs to see if having insurance coverage is worth it. Some dental and vision providers may give you a discount for paying out of pocket rather than through insurance.

Try to make time to check out your car insurance as well. Compare quotes from other insurance companies for the same coverage and talk to your current insurer to see if there are any deals available. If you can’t get the best rate from them, it might be time to move on.

It’s also prime time to check up on your home’s coverage. 

1Do you need to make adjustments to your homeowner’s insurance?
2If you still have private mortgage insurance, do you know how much more you’ll need to pay to get it removed so your monthly payments are lower?
3Do you qualify for any bundles with your homeowner’s insurance and other types of insurance?
4Talk to your lender to see what deals you can strike to save some cash.


Before wrapping up, explore or review life insurance plans. See if your employer offers one and what’s covered. Is it term life insurance or whole life insurance? What are the pros and cons for your family for choosing one over the other? If necessary, you can talk to a licensed life insurance agent to review what works best for your family.

Tax planning

No one looks forward to a hefty tax bill. If you’re trying to find ways to lower what you owe or increase your return, there are a few things you need to do.

  • Increase donations. The end-of-year giving is upon us and the more you donate, the lower your tax bill could go.
  • Max out retirement contributions. Make sure you’ve given all you can to your employer-sponsored 401(k) or IRA. 
  • Contribute to your HSA. If you have a health savings account, contributions are tax-free, so give yours a boost.

See which credits and deductions you qualify for now before you file taxes next year. Going through the motions can save you time when you submit your paperwork on Tax Day, but it also gives you a chance to see where you can catch a tax break. For instance, having children, caring for older relatives, or have adopted this year, you qualify for credits.

You may also be able to get the Saver’s Credit if you’ve made eligible contributions to your IRA. Don’t forget that some out-of-pocket medical expenses can be claimed on your taxes as well.

Retirement planning

Nearly 48% of Americans 55 and older don’t have anything saved for retirement. Whether it’s from poor planning, not earning enough to contribute, or another reason, that’s not a good sign. Even if they plan on never retiring, health issues or other concerns could force them out of work. If that’s the case, they don’t have any financial backing to support them.

Even if you’re considering never retiring, that doesn’t mean you shouldn’t have a plan in case something comes up that forces you to stop working. Carefully review your employer-sponsored 401(k) plan to make sure it’s doing enough for you. Make sure your employer is matching every dollar they can to your plan. Look over the fees and ask your plan manager if you’re unsure about anything.

Contribute as much as possible. For 2019, you can contribute up to $19,000 to your 401(k). If you have an IRA, it’s $6,000. And if you’re 50 years of age or older, you can add an extra $1,000 to your IRA without facing a penalty.

Saving for retirement might feel like an afterthought, especially if you have other pressing financial obligations to tackle in front of you. But try to make your retirement contributions a priority, even if it’s a little bit each month.

Estate planning

Thinking about death isn’t fun for anyone. But it’s a necessary step not only for you but for your family as well.

Look into a will, trust, and executor for after you pass. If you already have one or all those things, review them to see if anything needs adjusting. Are your children older? They might not need a guardian after you pass. Do you have grandchildren? Review what you’re passing along to them.

It’s also a good idea to have an end-of-life plan, like what to do if you’re ever on life support and if you’d like to be cremated or have a traditional burial. If you do plan on a burial, do you have a plot you could buy now to reduce costs your family will pay later? Check your life insurance policy and what your family could inherit after you pass. 

Have you checked your financial plan yet?

Going over every sector of your financial plan is tedious and exhausting, but it’s also worth it. It’s like a wellness check for your money: you know you have to do it but that doesn’t mean it’s the most fun activity.

But the stress money brings into your life can lessen with a financial planning check. It’ll give you peace of mind knowing you’re doing everything you can do live your best (financial) life.

Dori Zinn has been covering personal finance for nearly a decade. Her writing has appeared in Wirecutter, Quartz, Bankrate, Credit Karma, Huffington Post, and more. She previously worked as a staff writer at Student Loan Hero.