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Disco Balls and Piggybank

New Year Financial Checklist

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As we ring in the new year, many of us will resolve to exercise more, eat more healthily, be kinder, or get our financial house in order.  Many people already know what they need to do as far as exercising, eating healthy and being kinder. Conversely, many people do not know where to start when it comes to getting their finances in a good spot.  

Over the years, we have had the experience and privilege of advising tens of thousands of blooom clients on this topic specifically, so we wanted to share this knowledge in hopes that it will help even more people find the comfort and peace of mind from knowing that they are are taking the right steps to develop a solid financial footing, now and in the future.

When it comes to financial advice, there really isn’t a “one-size-fits-all” strategy but if you read on, and follow through on these things you can rest easier knowing that, in my opinion, you’ll have the majority of the most important elements to a sound financial strategy “in the bank!” The items on this checklist are meant to be done over time so please do not feel intimidated if you don’t already have most of these done.  Take it one step at a time and in doing so, you should feel a sense of accomplishment each time you check one of these off your list.  Without sounding too dramatic here – I firmly believe that if you can check off most of these items over time, you will literally change your life.  We will be presenting our advice in 3 separate articles over the next few weeks – just in time for your New Year’s resolutions!


Emergency Savings

Let’s start with the first step – a sufficient cash reserve, a.k.a. rainy day fund.  I believe everyone should strive to have a minimum of 3 months of your basic living expenses sitting in a savings account separate from your normal banking/checking account that you regularly use to pay bills from.  Figure out what your monthly core (minimum) expenses are and then multiply that figure by 3.  Things that would go into this category are all the expenses you have that you can’t skip (food, utilities, debt payments, childcare, insurance).  The purpose of this savings account is to provide you some peace of mind in the event that you were to lose your job.  You want to be able to continue paying your critical bills while giving yourself some time to find a new job.  Without 3 months living expenses you risk having to take any old job that may come along – even if it is something you don’t want to be doing.  Over time, as some of these other Financial To-Do’s are completed, it is a good idea to ramp up this savings to 6 months of your core living expenses for even more peace of mind.



If you have “bad” debts such as student loans, credit cards, car loans – your plan should be to get rid of these as fast as humanly possible once you have built up your emergency savings.  I am a believer in the strategy of paying off your debts in the order of smallest balance to biggest balance.  Since the plan is to get these debts out of your life, you need not concern yourself as much with what the interest rate on each debt actually is.  If you plan to be married to your debts for the rest of your life then the interest rate matters but for the purposes of this step – if you are hell bent on paying them off then you should line them up and pay as much as you can stomach towards the debt with the smallest balance.  Then once you get that paid off, you can enjoy the psychological satisfaction (don’t under-estimate how important this actually is) and then all of that money you were paying towards that debt gets rolled into the payment on the next smallest balance.  Continue with this strategy until all of your “bad” debts are paid off – while enjoying the satisfaction each time you pay one of the debts off entirely.  NOTE:  once these debts are paid off you should contact the lender and make sure they send you some form of a confirmation acknowledging that the debt is paid off AND the credit line is closed. Make a copy of the confirmation and keep it in a folder. There are several reasons you may not want to have a bunch of open credit accounts in your name.  Mainly, having several open credit cards that you don’t use can increase the potential for someone to steal your identity and run up fraudulent balances in your name.  

We also recommend going online to each of the 3 major credit bureaus and have them freeze your credit.  This will take a bit of time but the advantage is it makes it extremely hard for someone to steal your identity and open up NEW fraudulent credit accounts in your name.  Freezing your credit does not mean you are unable to use your already open accounts, just that new accounts will not be able to be opened in your name. Keep in mind, should you need to apply for credit yourself down the road such as a new mortgage or a refinance, you will need to go back to the 3 credit bureaus online and temporarily un-freeze your credit report.  In my opinion, this small hassle is well worth the peace of mind in knowing your credit is much more secure.



We generally don’t recommend that you pay-off your home mortgage at this stage.  For now, you should just consider if refinancing your mortgage is worth it.  As of the writing of this article (Mid December 2021) 30 year fixed rate mortgages are in the low 3% range and 15 year fixed rate mortgages are in the mid 2.5% range.  If you currently have a mortgage that is 1% or more, higher than the term of the current mortgage rate environment AND you plan to stay in your home for at least another 3 years then generally speaking – it may be worth the time (and headache) to refinance your mortgage.  Refinancing is the process of “re-doing” the loan on your house.  For the most part, over the past nearly 40 years, we have been in a declining interest rate environment.  That means, there is a good chance that the current mortgage rates could be less than when you last did your mortgage.  If so, and if the difference is big enough (1% or more) then it could literally save you money each and every month on your house payment.  It is not unusual (depending on your mortgage balance and your interest rate) to see your monthly payment decline by several hundred dollars after refinancing!  Blooom clients can message a blooom financial advisor at any time and we are happy to run the analysis to see if refinancing your mortgage would benefit you.  NOTE:  for “advanced” users, if you are able to handle the higher payment of a 15 year mortgage vs a 30 year mortgage, I can think of very few things in your life that will have as big of a benefit on your financial situation as this.  With a 15 year mortgage, your monthly payment will obviously be much bigger than a 30 year mortgage – which generally means that you would need to buy a smaller home to afford that payment.  Very few Americans are willing to compromise the amount of house they can buy for the financial benefits that accrue to you by doing a 15 year mortgage but for the few that do – it is game changing!  You build equity in the home so much faster due to the fact that much more of your monthly payment is going towards paying down the principal portion of the loan (your home equity) instead of the interest (the money that the bank makes off of loaning you the money).  Even if you don’t stay in your home the full 15 years, when you go to sell the house you will have much more equity to pull back out if you did a 15 year mortgage vs a 30 year mortgage.

Alternatively, if you’re unable to afford the higher monthly payment of a 15 year mortgage, but want to accelerate paying off your 30 year mortgage, you can choose to make extra principal payments as your cash-flow allows. This option gives you flexibility in an environment where house affordability is becoming worse and worse, particularly for young families.


In Part 2 we will cover retirement savings advice.



The information provided is for discussion purposes only and should not be considered as advice for your investments. Please consult an investment advisor to discuss your specific needs.

Published on January 4, 2022