MINNEAPOLIS — Pop open the champagne, it's time to celebrate!
2019 was a great year on the stock market, but going into 2020...
"There's a lot of optimism, but people are also apprehensive," Great Waters Financial advisor Will Johnson says.
Reasons to celebrate:
- The market is at historic highs, and trade talks are improving with China.
- President Trump announced this week that a “phase one” deal with China will be signed on January 15th.
- Record low unemployment rates mean a lot of people are working and doing well.
- Interest rates have stabilized.
Reasons to be concerned:
- A tough presidential election with a lot of uncertainty.
- Trade dispute with China still hasn’t been fully resolved.
- An aging bull market that some argue will finally come to an end in 2020.
"I don't think there is anybody who can definitively say 2020 is the year we're going to enter a recession, but there's nobody who can definitively say it's not either," Johnson says.
So, instead of focusing on what we can't control, the market, Johnson says your New Year's resolution should focus on what you can control.
First thing on his list, your investments.
“If you’re still at least five to ten years away from retirement, don’t change your investments. If the market enters a recession period, continue to save, and try to save more, because it’s almost like everything goes on sale,” Johnson says.
“If you are close to retirement, have a plan, have a plan, have a plan. Make sure you’re protected if the market goes up, down or sideways. You should feel confident that you can retire or stay retired and continue to live the lifestyle you want.”
Next, know your budget.
“It’s not only going to help you figure out what your goals are and should be, but also it helps you meet those goals by identifying where money can be saved,” Johnson says.
And if you find extra money in your budget, Johnson says you should put that money into long-term savings.
"Put an extra percent in your 401k or if you haven't started a Roth IRA, start adding it there. It really adds up. We often say it’s not about timing the market, but the amount of time your money spends in the market that makes a difference,” Johnson says.
And last, save money on taxes and fees.
“The fees you spend on investing really add up over time. Know how much you’re spending and how you can save. With taxes, it’s not fun, it’s not sexy, but minimizing taxes are really important. It may be the most overlooked principals in financial management,” Johnson says.
Some ways to save money on taxes include starting either a health savings account or flexible spending account with your employer.
Putting money into these accounts minimizes your taxable income so you end up paying less in taxes.
Other options for saving money include 529 College Savings Accounts, 401K investments, IRA accounts and Roth IRA accounts, and child care expense accounts.
Johnson says 2020 brings a lot of uncertainty in the stock market, but if your finances are in order and you have a plan, he says you shouldn’t be worried.
"Unless you find that magic crystal ball that tells you exactly when it's going to drop, continue to save, continue to invest, have a plan and don't lose sleep over whether the market is going to drop."