Reviewing Finances in the New Year

With the new year upon us, resolutions and reviews of all kinds are taking place. When it comes to your finances, there can be many elements to take into consideration. We are going to explore the common elements and the often forgotten about financial items. Elizabeth Ayoola, Personal Finance Expert at NerdWallet joins us for this episode to discuss.

Summary – Cents of Security Podcasts Ep. 82

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Cassidy Clement:

Welcome back to the Cents of Security Podcast. I’m Cassidy Clement, Senior Manager of SEO and Content at Interact Brokers and today I’m your host for our podcast. Our guest is Elizabeth Ayoola, Personal Finance Expert at NerdWallet. With the new year upon us, resolutions and reviews of all kind are taking place. When it comes to your finances, there can be many elements to take into consideration. We’re going to explore the common elements and the often forgotten financial items. Welcome back to the program, Elizabeth.

Elizabeth Ayoola:

Thank you for having me. Happy to be here. Happy new year.

Cassidy Clement:

Yeah, same to you. So when we’re getting into the new year whatever year you’re listening in What are some places that listeners might want to look to review? I mean, initially people make resolutions when it comes to going to the gym, or maybe saving more money, or looking at their retirement if they start to get, you know, closer to a different milestone. What are some things that that people should be reviewing?

Elizabeth Ayoola:

Well, the biggest thing that people should be reviewing when setting financial goals is their budget. And this can be a very terrifying task right after the holidays for those of us, talking to myself too, who have done some spending. But the first thing you want to look at is your budget and I’ll break down a couple of those elements to focus on.

So firstly, you want to look at your income, that’s the largest piece. And you want to look at that, especially if you’ve had changes over the past year, whether that means you’ve lost income or thankfully gained some new income. Then you want to take a look at your savings. So this can be a fun task. I personally like doing this, checking out my net worth.

So you want to look at how much you have saved in your brokerage accounts, all of your retirement accounts. So think your 401k, your IRA. If you have a health savings account, you want to look at that too. Pensions or CDs as some examples. Next, you want to look at your expenses. So this is a good time to review any expenses you have or ones that have fallen off.

So for instance, I moved from an apartment into a house six months ago. So that means that I have new expenses because now I have to think about things like lawn maintenance and I’m also paying for water. I also don’t do therapy as frequently anymore. So that reduces my expenses in that bucket.

And then the last thing I would say people should look at is their debt. This is a big one because it can be an impediment to you achieving your financial goals if you don’t have a clear picture of what your debt is. So see how much that you’ve spent, check out all your credit cards again, check the balances on your accounts. If you have overwhelming debt at this point, think about options like a balance transfer to minimize the amount you’re spending on interest.

Cassidy Clement:

Yeah, those are really good points. I think something that a lot of people forget about as you enter the new year is, you know, what are those new expenses that are going to be coming down the line? Is there something new that has entered your plan? Is it a home like you used or maybe it’s a new pet or a new family member on the way or a new milestone you’ve hit? Another thing is health expenses. Is there something within the year that maybe there’s something that your healthcare coverage covered in the past, but now it’s not there anymore? And of course your debt is the biggest thing. We’re recording this in 2025, you know, with elections and how the landscape changes there.

Sometimes there’s different interest rates or things of that nature that can change. I know people who look at student loans, this is kind of, something if you’re entering the area of a college or student loan, sometimes. If you’re doing federal loans that it can be impacted. But along those lines, interest rates was one of them. What are certain metrics that people who are reviewing their finances should also look to in tandem of reviewing their financial goals? Because interest rates are a perfect example but what about, you know, fees associated with certain accounts? Or maybe there’s a 401k match change in your company? What are some other things that people may not have thought about that they should review in tandem with their goals and budget?

Elizabeth Ayoola:

Yeah, I love that question. So you’re right, the economy can have a huge impact on your financial goals. So people should definitely be paying attention to key economic metrics. So, like you said, some include the Fed rate, interest rates on savings accounts. You also want to look at interest being charged for debt and also lending rates and kind of on the opposing side, or maybe on the more fun side, if you have high yield savings accounts, for example, you want to see where those rates are going now as well.

So because the Fed has done a couple of rate cuts now and we see interest rates going down, what that means on, high yield savings accounts, for instance, is that we’re not getting as much interest on our savings. So those are some things that you want to factor in as well.

Cassidy Clement:

Yeah, and there’s also questions that usually arise when we’re looking at the quote unquote, like, yearly review or new year review when it comes to budget specifically. People may be asking, okay, did my income increase or decrease? Did my debt increase or decrease? Is there certain types of investments or financial planning that is probably going to be advantageous for the year ahead? And what are my short term or long term goals?

Another big one is emergency funds. You know, is that something that I need to have in place that I haven’t had in the past and this is the year I can finally do it? Something like that. All of those questions kind of, I don’t want to say rely on this, but it’s important. It’s vitally important in my opinion to keep this in mind, which is organization and tracking progress. It’s one thing to say you’re going to do it. It’s another to actually keep yourself accountable and actually reach those goals. So what are some ways that listeners can stay organized to track their progress if they’re looking towards one of these new financial goals, as we’re at the start of a new year?

Elizabeth Ayoola:

Organization and tracking is huge. So I put myself in this bucket too. A lot of us start off the year and we have these lofty goals. Lofty goals are great. But we do not have a strategy in place or any accountability for how we’re going to follow through with those goals. And generally budgeting can be very tedious when you don’t have a system in place.

So with that in mind, one of the things that people can use, especially if you are comfortable with technology, is a budgeting app. Budgeting apps can be useful because they help you track your spending, and that’s, in my opinion, one of the largest parts of budgeting, because you can, you know, map out your income and expenses and you can set all these goals, but if you’re not tracking how much you’re spending then it’s kind of difficult to stick with those goals. So you wanna look for a budgeting app that relates or rather aligns with your personality and your lifestyle. And what do I mean by that? I mean, you want an app, for example, if you are somebody who doesn’t like a lot of heavy lifting, doesn’t like too many details then you may use a app that front loads all of that work for you. And maybe all you have to do is input your information and it does the rest of the budgeting for you. But if you’re someone who is a frivolous spender or one of your goals is to stop impulse spending, then you may look for an app that is a little bit more hands-on and requires more work on your part, but will help you better track your spending. So you see where every dollar is going.

Cassidy Clement:

Yeah, there’s definitely been three key things, at least that I have found in my research when it comes to goal setting, at least in terms of finance, and that is priorities, details of your plan, and then the ability to adapt with that plan because you’re probably going to have a goal in your list that is a little bit more of a want than a need.

We all have that. Maybe it’s a really extravagant vacation that hasn’t been taken, or just a vacation. Maybe you haven’t taken one in a few years for whatever reason, or the details associated to a plan. You may say, I really want to own a home this year, but what about the details to that? Are you in an area that you can afford? Could you afford the taxes in that area? Are you in a place that is near where you work because you have to be in an office setting, or maybe you’re a professor or a teacher where there’s only so many times that you have to be in that place to teach a class or something like that. And then finally, the adaptations.

We’ve seen so many ebbs and flows with financial markets. You know, you don’t want to put all your eggs in one basket. If your plan derives all of its value from tech stocks and there’s an issue in the tech market or the tech sector, that’s going to be a bit of a problem. What’s the adaptability there? Those are some things that I really saw come across as we’ll say high value points to keep in mind upon your final review of your budget for the year. That leads me kind of into my next question, which is certain aspects that get overlooked. Some people, it all depends on where you’re at in life and what your portfolios look like, but there may be some things that come in the new year such as new insurance or rewriting a will or reevaluating your estate or maybe your parents or relatives helping them out with that.

What are some aspects of personal finance that you see tend to get overlooked or maybe even just missed in yearly financial reviews or even included in a budget?

Elizabeth Ayoola:

Yeah, so you mentioned something earlier, which I love. It’s a simple thing. Maybe people are tired of hearing it, maybe not, but it’s so important and that is a 401k match. So I do think people at the top of the year should consider planning their savings goals and ensuring that they’re utilizing this free money from their employer to boost their savings. So, let’s say you’re gonna get, I don’t know, an extra 3000 that goes towards your retirement savings every year, and you overlook that for the next five years, then that’s maybe $15,000 that you’ve missed out on of free money that could have gone towards retirement savings.

So with that said, people should consider calculating how much they need to contribute to their 401k account in order to get that match. And at the bare minimum another thing that people should keep in mind is tax incentives. So, it’s the top of the year, and it can be a good idea to plan your savings to potentially minimize your tax bills ahead of next year.

So what do I mean? For instance, if you put money into a traditional 401K, a health savings account, or an IRA, it could essentially help you minimize your taxable income. So planning that at the start of the year versus waiting till the end of the year to scramble and find money to contribute, to minimize your tax bill can be a lot more helpful as well.

Another thing is I might lump these two together, but estate planning and insurance, again, at the top of the year is a good time to review how your lifestyle has changed and how that might impact your finances. So for instance, have you gotten married over the past year? Did you have a new child? These are instances where you may need to establish or update an estate plan or even get additional insurance. Like you mentioned earlier, has your health changed? Have you developed a new health condition? These again are all instances where you may need to review both your insurance needs and your estate plan as well.

Cassidy Clement:

Yeah. And I mean, for the taxation part, of course, you know, you would want to speak to your accountant and, or, you know, your financial advisor, but there’s definitely things that change over time. You know, there may be a different tax credit this year that you can utilize, or maybe there’s a new element to estate planning, or the current rate of inflation may impact the way that you are saving for a tax bill you thought you had. And now maybe that money that you invested, maybe it’s in high yield, isn’t what exactly you thought it was going to be. Another thing that I think is really important, especially for people who maybe have a few years in the workforce, or maybe they’re hitting a certain milestone in terms of maybe their income is reflecting on what their goals are and if it warrants a financial planner or an advisor.

We have a, episode here on Cents of Security about what to look for in a financial advisor, but that is something that maybe when you hit that point where you go, okay, I’m in this stage where I’m kind of set and I need to focus on growing in this certain area or growing with this amount of money. That may be warranted because you may have a lot of elements that you need to cover and some people maybe are more involved in the markets and the news and some aren’t and it can fit different pieces. But I think it’s really important because there’s different ways that people spend, save, and invest, and if you don’t have the time or totally the understanding to look at that you know, it could be a missed out piece, just like you were saying, leaving money on the table with 401k match.

Elizabeth Ayoola:

Absolutely. Something else just comes to mind for people to think about or that they may miss as well is changes to these retirement accounts in terms of the contribution limits. So they tend to increase not every year but some years the 401k contribution may increase. For example, we’ve seen an increase in Increase over the past few years. So you also wanna make sure you’re paying attention to those changes and like you mentioned, changes in tax credits because that can affect basically how much you save or even how much money that you get back as well.

Cassidy Clement:

Yeah, definitely a big element is at least, for those of us who are in the workforce, listening is retirement savings. It’s a very helpful piece if you’re able to utilize an employee match, definitely to look into that. That can help being advantageous help with being one of those really advantageous and grow, grow, grow type of mindset type of financial goal in the new year. Especially if you have the opportunity to have a high employee match or employer match.

Elizabeth Ayoola:

Absolutely.

Cassidy Clement:

So thank you for joining us today, Elizabeth. As always, you brought some great points.

Elizabeth Ayoola:

Thank you for having me. Happy saving.

Cassidy Clement:

Yeah. Happy saving to all and happy new year to all. As always, listeners can learn more about an array of financial topics for free at interactivebrokers.com/campus. Follow us on your favorite podcast network and feel free to leave us a rating or review. Thanks for listening.

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