Happy New Years! I only have your attention for a few minutes until those other resolutions take over, so before you start scanning posts of perfect abs in three minutes a day take some time to go through these short-n-sweet steps and prepare yourself for money success in 2013.
1. Take
Financial Inventory
Make a list of all your assets (checking and savings
accounts, 401(k)s, IRAs, property) and add them up. Now list all your
liabilities (student loans, mortgages, credit card debt) and subtract them from
your assets. Is the resulting number positive or negative? How has it changed
since last year? Check whether you have any duplicate accounts to consolidate,
and check the interest rates on your savings accounts, loans and credit cards
to see if you can get a better deal elsewhere. Bankrate.com is a good tool for
comparing rates. Save this list for future reference and make
sure someone close to you could access it if anything happened to you.
2. Review Your Cash Flow
Notice a difference in your first paycheck of
the year? One tax cut not extended this year is the 2% payroll tax holiday, which means
your paycheck just shrunk by 2%. Don't be fooled by the name "payroll tax," this increase affects the self-employed
too. Revisit your budget to identify areas you can reduce by that amount and make sure you continue to allocate enough to savings while keeping your expenses to
manageable levels (see The "B" Word).
Start planning now for large expenses in the coming year—hey, imagine if you
saved for Christmas all year long instead of waiting until the end of the year?
3. Set Financial Goals
What do you hope to accomplish financially
in 2013? Where would you like to be in one year, and in five years?
Set a few short-term, mid-term, and long-term financial goals and monitor your
progress each year. Defining your goals is the first step to achieving them!
4. Check Your Credit Report
Your credit score affects everything from the interest rate on a mortgage or loan to your ability to rent an apartment
or get a job. Make sure you know where you stand by monitoring your credit
reports regularly. Annualcreditreport.com allows
you to check your credit report from each of the three reporting agencies
annually for free. Check for suspicious activity that could signify identity fraud.
5. Adjust Retirement Savings
The maximum contributions for retirement
savings increased for 2013, so you can now contribute up to $17,500 to a 401(k)
and $5,500 to an IRA. Too high for you right now? Try increasing your current
contribution by 2% of your income each year until you
get to the max. The maximum income levels to contribute to an IRA have also
changed. If you are eligible for a company retirement plan, you lose your ability to deduct all or some of your traditional IRA contribution if your AGI is over
$95,000 for married couples or $59,000 for singles. Similarly, your eligibility for Roth IRA contributions starts phasing out at $178,000 for joint filers and $112,000 for single filers. You may need to revise your retirement savings plan if recent raises or bonuses push you over those levels. Finally, check
whether your company has changed any of your 401(k) features. Is there increased/ decreased contribution matching? Are matches now made in company stock? Do then now offer a Roth 401(k) option? Make sure you are taking full advantage of your
company plan, they should have a plan advisor available to help simplify the features
and answer any questions.
6. Automate!
Make 2013 the year of simplicity. Automate
your bill paying to avoid late fees and missed payments, and make sure you keep
enough in your checking account to cover them. If you are worried about your
cash flow you can always set up bill pay for minimum payments and then manually
pay off the rest of your bill each month. Just as important is automated
savings. Request that your direct deposit be split between your savings and
checking account, or set up an automated transfer between the accounts each
paycheck. Putting money away for the future can be tough for us spenders, so
make it as painless as possible.
7. Review Your Investments
The US stock market, as represented by the
S&P 500, was up 16% in 2012, while the international indexes were up over
17% (EAFE). This means your equity holdings likely increased and are now a
bigger piece of your portfolio. Take some earnings off the table by rebalancing
back to your appropriate asset allocation. When looking at performance compare
all of your holdings against their best-fit benchmarks to compare apples to
apples. Make sure your portfolio is properly diversified and aligned with your
financial goals.
8. Review Your Insurance
Did your homeowners and car insurance increase in 2012? Shop around to see whether your rates are still competitive.
The new health care laws have caused some employers to change policies, so take
time to review the terms of your health coverage. And if you have dependents
you should have life and disability insurance, confirm each year that the
amount is enough to satisfy your family’s needs.
9. Review Your Beneficiaries
401(k)s, IRAs, and insurance policies are examples
of accounts with beneficiary designations. These accounts pass to the named
beneficiary regardless of what your
will states. Make sure to review your beneficiaries often, especially if there
have been any marriage, divorce, births, or deaths in your family.
10. Charitable Planning
Do you have funds budgeted for donations, but
end up just giving haphazardly to whichever charities catch your eye that year?
Make a plan now to determine now how you want to spend
your donation dollars throughout the year. Consider giving a monthly amount to organizations
important to you, it is advantageous to your cash flow and that of the
organization. After allocating funds to the non-profits/ schools/ churches closest
to you, earmark an amount for “emergency” giving. Similar to an emergency
savings account, these funds are for requests that pop up along the way,
whether a friend’s fun-run or next year’s big natural disaster.
May 2013 find you healthy, wealthy, and wise!
This post is for informational purposes only. Like most things published on the internet it is best taken with a dose of common sense. It is not meant as tax, investment, or legal advice. Your personal situation may differ, so consult with an expert for customized financial planning.
photo credit: Daniel*1977 via photopin cc
This post is for informational purposes only. Like most things published on the internet it is best taken with a dose of common sense. It is not meant as tax, investment, or legal advice. Your personal situation may differ, so consult with an expert for customized financial planning.
