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'I would stress budgeting more than ever this year': Financial Expert on retirement planning

Chris Hogan, 'Everyday Millionaires' Author & Financial Expert, joined The Final Round to discuss retirement planning through the end of the year as the state of the pandemic remains uncertain and he gives his best tips for handling your finances.

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. It's time now for our retirement segment, brought to you by Fidelity Investments. 2020 has certainly been an eventful year for many folks watching their finances. So how do we need to be thinking about 2021 as this year finally, mercifully, comes towards an end?

For more on that, we're joined now by Chris Hogan. He's the author of "Everyday Millionaires" and a retirement expert. Chris, thanks so much for joining the program once again. So it is only September 9, but I think it is certainly time for folks to be thinking about what next year may bring for them financially, what they can do to sort of shore things up as 2020 comes to a close. What's in your mind the biggest thing that people need to be aware of as they reflect on sort of the journey we've all been on over the last six months and what the future has in store?

CHRIS HOGAN: Well, let's be honest, the journey that we have been on over the last several months has been a really crazy ride. This pandemic has been a gut punch, a throat punch, and a headlock. I mean, it's had us all over the place.

But the reality is this, we still have three and a half months left to go. OK, we cannot kick up our feet and just turn it in for the year and think that everything is going to be OK, because I think we have an opportunity to do more damage as we enter into the holiday season financially, or we can begin to right the ship and put ourselves on the right path. So 2021 I think is going to be a year of opportunity. We don't know what we're doing with the pandemic. We don't know if there's a vaccination or a cure, but I want people to focus on what they can control.

So I'm giving you four tips that I want people to do to get ready for 2021. Number one is build an emergency fund. It is so important to have that cushion between you and life so when things come that we don't know or we're not aware of or ready for, financially, we can be prepared. I tell people to have three to six months of expenses set to the side.

Number two is avoid raiding your retirement accounts. The CARES Act came along, and it was supposed to save the day, but really it was a short term solution that could have a long term implication with people raiding their retirement. So I'm advising people not to touch it. Leave it alone.

Number three is get yourself out of debt. Interest that you pay is a penalty, people, we've got to learn how to count. So get yourself out of debt so you can keep more of your money, and then you could do my fourth tip, which is continue to invest. It is so important that you utilize the 401(k)s, your Roth IRAs.

We know what the market is doing. I just took a look. The Dow is up 679, the NASDAQ is up 340, and the S&P is up 88. So it's going to come back. It's going to go up and down, but we've got to be ready for the ride. And finally, focus on what you can control. I'm not worried about other people's opinions, you can control your money.

MYLES UDLAND: So, you know, Chris, you mentioned the stock market. Again, we are at a record high a week ago today. So as you note, things have certainly turned around through the summer. You mentioned the holiday season. What are things that you have either seen folks do or heard folks saying they may do as they get towards the holidays, because everyone wants to have a big Christmas, but what are the mistakes people can make on the way to getting there?

CHRIS HOGAN: Well, I think first and foremost is forgetting that Christmas is actually on December 25. I know, they never change it. It's that way every year. But what we can't do is go above and beyond, and what I mean by that is overspending. I think this is a year to reset and to be very intentional.

If you don't have the money to buy a gift, do something for someone. Cook a meal for them. Offer to watch their kids. You know, do something within your budget. I would stress budgeting more than ever this year. The last thing we want people to do is add more money to credit cards that it could take them 18 to 36 months to try to pay off.

SEANA SMITH: Chris, you mentioned, and you were just talking about, just getting yourself out of debt. I mean, this is a monstrous task for so many people. They face a lot of debt, I mean, right out of school when you talk about student debt, and then you can acquire pretty quickly with credit cards in your 20s. What's your advice, just in terms of how to best tackle this? Because I think that is the question, and that is action and a lot of people are struggling with at this point.

CHRIS HOGAN: Yes, ma'am.

SEANA SMITH: Especially at a time like this.

CHRIS HOGAN: No, you're absolutely right. I think one of the big things is to understand this debt is real, and it brings with threat. It steals from you now but can also take your peace of mind. I think the big thing is is understanding you didn't get into debt overnight, and it's not going to get out overnight. What you have to do is understand and prioritize it, and let's not add to it while you're getting serious about getting out of it.

So I teach the debt snowball approach which is where you're going to list them smallest to biggest, right? It's not about math, getting out of debts about momentum. So you're going to make minimum payments on everything else, but the little one, you're going to throw everything at it. And what happens is is your psyche changes, because you start to see these debts actually go away. So I empathize with people, but I talk to them on my show, "The Chris Hogan Show," they are getting out of debt slowly but surely.

MYLES UDLAND: All right, Chris Hogan, author of "Everyday Millionaires," also the host of "The Chris Hogan Show." Chris, always appreciate the time. Thanks so much for joining the show today.

CHRIS HOGAN: Thank you, my friend.