YOUR PAYCHECK NEEDS A PLAN, TOO: FOUR WAYS TO OPTIMIZE CASHFLOW IN Q1 AND BEYOND
It’s the start of a new year, and now is a great time to reflect on your financial past, present, and future.
Assessing your financial goals is important for everyone, but it can be particularly valuable if you’re approaching retirement.
The good news? No matter your age, there are plenty of opportunities to optimize your cash flow for 2026 and beyond.
Examine Your Financial Past, Forecast Your Financial Future
Your income and expenses form the basis of your financial plan, so it’s time to gather a solid understanding of your net worth and assets, as well as your income and projected expenses for the year. (1)
Whether you adhere to a strict budget or loosely track your spending, it’s time to ask yourself: Is the method I’m using aligning my cash flow with my financial goals? (1)
Pay special attention to any anticipated changes in your income, including new employment, a bonus, inheritance, or retirement account distribution. (1)
Once you gather a clear understanding of your full financial picture, you can evaluate and refine your plans for the new year. (1)
Establish your goals, assess their attainability, and make any necessary tweaks to your plan, including reducing expenses or increasing savings and investments. (1)
Save First, Spend Second
When payday rolls around and you’ve finished paying all your bills, it can be tempting to go overboard with your discretionary spending. (2)
Before you start swiping your card, prioritize saving by transferring funds to your savings account and making sure you have enough set aside for emergencies. (2)
Consider making saving effortless by setting up bi-weekly or monthly deposits into your savings account. Automatic deductions ensure that you’ll never get behind on your goals, and you can always adjust the amount if plans change. (2)
Adjusting Your Retirement Savings
When totaling the balances of your retirement accounts, how close are you to your savings target?
If you’re falling behind on your savings target, consider ramping up your deferrals to a 401(k), 403(b), or 457 plan. If you can afford it, the maximum limit is $24,500 in 2026, plus an additional $8,000 for those 50 and over. (1)
People between the ages of 60 and 63 are allowed to defer up to $11,250 in catch-up contributions, instead of the standard $8,000, if your employer’s plan allows it. (1)
Depending on your financial situation, a Roth IRA conversion may help your plan by reducing your income tax liability in retirement. Among other items you may want to discuss with your financial professional, consider covering the implications of a Roth conversion on available tax benefits and future Medicare premiums. (1)
Avoid “Lifestyle Creep”
Also known as lifestyle inflation, lifestyle creep is when your spending increases as your income rises, causing you to spend more on non-essential things, potentially neglecting your financial and savings goals.
This increase in expenses, such as upgrading to luxury items or dining out more, makes former luxuries feel like necessities, leaving you with little money to spare despite earning more.
It isn’t a question of if you can afford the lifestyle upgrade or not, but rather, should you take on the additional expense? Doing so may hinder your ability to save for other goals, such as buying a house instead of continuing to rent, or contributing more towards your retirement fund. (1)
Article Sources:
1) Fidelity Viewpoints. “5 steps to power up your finances,” Fidelity. December 18, 2025. Accessed January 12, 2025. https://www.fidelity.com/learning-center/personal-finance/create-a-financial-plan.
2) “7 financial habits to set your new year up for success,” Citizens. Accessed January 12, 2025. https://www.citizensbank.com/learning/financial-habits-for-new-year.aspx.
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