How to Achieve Financial Fitness in a Year

Written by Rita Silvan

Can someone who's "not particularly good with money" put his financial life in order? This is what John Schwartz, a writer for The New York Times and author of This Is the Year I Put My Financial Life in Order, set out to do. He and his wife, Jeanne, both in their 50s, had saved money for retirement, but they had also made some missteps (they had no wills, for example). They wanted to know whether or not they would be comfortable in their old age.

Many of us make resolutions at the start of a new year, yet lasting change is incremental and rarely accomplished quickly. Schwartz recommends tackling one financial matter per month. Just think, if you start now, your financial house may just be in order by the next new year!

Here's a month-by-month look at some of Schwartz's recommendations:

January: How's Your Retirement Plan? If you're enrolled in a company pension plan, open those statement envelopes and see where you stand. If you're self-employed, decide if you've got the right types of accounts to help you save. Schwartz believes his best move was enrolling in his company's pension plan. "I assigned 10 per cent of my income to the account — money I'd probably never miss… And then I basically forgot about it." Even when he felt financially squeezed later on, he never dropped the contribution.

February: Closing the Gap If there's a projected shortfall between your expected pension income and your expected retirement needs, how are you going to close the gap? Schwartz recommends four simple ways to gain financial stability:

1. Save more, spend less. The sooner you develop good saving habits, the longer your money can grow through compounding. Don't be miserly with yourself, but be mindful of your spending.
2. Pay down credit cards. This provides an immediate, risk-free return. (After all, how many investments guarantee a return in line with the amount of interest you pay on your unpaid credit-card balance? )
3. Set up a retirement savings plan. At work or on your own. Period.
4. Invest your savings wisely, taking into account your risk tolerance and your overall goals.

Schwartz says he took a misstep here. When his family's credit card "was groaning with a high balance," they cashed in their personal retirement savings to pay it off. That decision came with a cost for them: a penalty for early withdrawal and other fees, and missing out on long-term compounding.

March: Learn More about Personal Finance Schwartz suggests reading about personal finance and investing, or taking a course. Online investment communities can also offer loads of learning opportunities.

April: Will Power Do you have a will, power of attorney documents and medical directives? Now might be a good time to get them or update them. Schwartz didn't have one, telling one interviewer he hated thinking about money and death. If you die without a will, the law can step in to distribute your estate. Not only can this tie up your assets for longer, but it could mean they're not distributed according to your wishes. Find out more in Estate Planning for Financial and Emotional Peace of Mind.

May: Life Line What kinds of insurance, and how much, do you need? Do you understand what your insurance will (and won't) cover? After Jeanne was hit by a car, the couple realized that without adequate insurance, it would have wiped out all of their financial gains from the previous year. Schwartz also recommends considering medical insurance for pets, since veterinary care can be prohibitively expensive.

June: Cutting Costs and Credit-Card Cleanup

Do you know what you're paying for? Try some of Schwartz's tips to help reduce expenses and stay on top of credit-card debt:

• Avoid late-payment charges on your credit cards.
• Try to pay off your balance in full to avoid paying interest.
• Avoid spending on things that aren't essential.
• If your spending seems stubbornly high, budgeting apps can help you stay on track.
• Understand what you're paying for phone, cable etc. and call customer service to negotiate lower rates to cut costs.
• Avoid "subscription creep." Do you really use all those cable channels and streaming services that are automatically charged to your card?

July: Catch Up Use this month to tie up loose ends from previous months.

August: Holiday! We all deserve a break sometimes.

September: Family Matters Talk to your family about your finances. Where appropriate, share copies of your list of financial assets, will, powers of attorney and medical directives, or let people know where you keep these documents.

October: Time for another catch up!

November: Reach Out Ask elderly family members about their medical care options (and finances) before their health declines.

December: Review

Anything need a tweak? Now, congratulate yourself on a year well spent!