Weekly Digest: Small Actions Make a Huge Impact

Roth money, I-bonds, and how the little things add up.

How you live your day is how you live your life. This saying applies to all aspects of your life—physical, emotional, intellectual, spiritual, and especially financial.

Many people think getting on solid financial ground requires grand gestures followed by an ongoing flurry of busyness. Anyone with true financial success under their belt understands it is quite the opposite—slow and steady habits are the recipe for success, just like regular exercise and diet lead to a healthy body. Routine actions regarding your finances lead to a healthy financial life.

There are some daily/weekly financial routines that I highly recommend—tracking your spending, family financial meetings, etc. There are also quarterly/annual routines that play a significant role in success. Here are some I recommend you tackle before Q1 2024 comes to a close.

Q1 Routine Checklist

Often Q1 of any year kicks off the tax preparation period. While you prepare for that, I recommend taking stock of a few things and making them part of your financial routine every Q1.

1. Review your cash positions.

Make sure you update your balance sheet, and in particular this quarter, focus on the cash accounts. Ask yourself: Where are you holding your cash? What interest rate are you getting? Should you find another high-interest bank or money market account?

I-Bonds: In particular, many of us invested in I-bonds over the last few years because they were very competitive rates. They have since become uncompetitive. If you have these bonds, it’s time to consider reallocating this cash to a more competitive high-interest-bearing account.

2. Check your 401(k)/retirement contributions.

You should be targeting to save 15% of your household income for retirement. Perhaps that is not feasible for you at the moment, but what I recommend every year is at least increasing your contributions by 1%, inching up to the ultimate target. (Another tactic, next time you receive a raise, contribute that raise to your retirement—you won’t notice!)

3. Make Roth money a priority by funding a Roth or even implementing a Roth conversion strategy.

My company stresses the importance of making Roth money a significant part of your retirement plan—especially if you are young.

Along those lines, I covered Roth conversion planning in my livestream last week. (Podcast recording available here.) Conversions allow you to pay the taxes now—possibly spreading them out—and avoid taxes on some of your retirement withdrawals in the future. In this episode I explained what a Roth conversion is, when it makes sense to implement, and how to do so effectively.

Here is a guide I created that I also talk about in the episode. Use it if you are thinking about Roth conversions.