2013 Financial Checklist- 10 Steps for Money Success in the New Year

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!

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.