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Ring in 2012 with a Solid Plan for Your Future
With the New Year upon us, now is the perfect time to make some financial resolutions to help you ring in 2012 with confidence. According to a survey by Fidelity Investments, most people are likely to say they want to save more and spend less.
While increasing savings and decreasing spending are always important goals and a great place to start, don’t feel like you have to stop there say financial planning experts at the New Jersey Society of Certified Public Accountants (NJSCPA). If the recession is grinding on a little longer than you thought or you’re ready to change the way you look at your money, it’s time to create a plan to go above and beyond the basics.
Top Tips for a Financially Healthy New Year
1. Move the goalposts. How have your goals changed over the last 12 months? How should any changes be addressed through your financial situation? Haven’t set any financial goals yet? No problem: Now is the perfect time to get started. Divide your goals into two categories: long-term and short-term, and don’t be afraid to get specific. Then you can create plans to meet each set of goals.
2. Build a better budget. Yes, this is one of those back-to-basics suggestions, but it also serves as the foundation for every financial decision you’ll make. Make a list of your expenses, deduct it from your income, and you’ll see where you stand in black and white. You may need to trim some expenses to be sure you have enough to live within your means and still contribute toward your future financial goals.
3. Create an emergency fund. Like saving more and spending less, being prepared for an emergency is an important part of your financial security. Unplanned expenses happen, so make sure you’re prepared for the unexpected. Experts suggest setting aside three to six months of living expenses for when you need it most.
4. Save for a down payment. Lending is tight, but many Americans still hold onto the dream of owning a home. If homeownership is one of your long-term goals, start saving. Depending on real estate prices in your area, be prepared to make a down payment of 10 to 20 percent. If you can make a 20-percent down payment, you avoid having to pay private mortgage insurance, so there’s an incentive to reach that level. It may take you a little longer to reach your goal, but going back to those basics of saving more and spending less will help you on your way.
5. Prioritize your debts. Most people generically say they want to pay down debt, but not all debt is created equal. For example, credit cards with high interest rates should top the list of debt you want to get rid of first.
6. Don’t forget about retirement. It can be difficult to think about retirement when it might still be a long way off, but don’t be fooled into a false sense of security just because you think you’ve got plenty of time. If you don’t have one already, open an individual retirement account (IRA) – your CPA can help you decide whether a traditional IRA or a Roth IRA is best for you. And keep contributing to your 401(k) if your employer offers to match your contributions. It’s not every day free money is thrown your way, and that’s precisely what your employer match offers you. Maximize those contributions.
7. Review your income tax situation and estate plans. Are you getting a large tax refund? Have there been changes in your tax situation? Are you part of a two-income couple having only one income due to a job loss or pregnancy? Have you changed from being an employee to being self-employed or vice versa? Have you or your spouse retired and started receiving pension income or attained the magic age of 70 1/2 and now must begin receiving mandatory IRA distributions? You may need to change your withholding in order to avoid unpleasant surprises. You don’t have to live in a mansion on an estate to need an estate plan. Anyone with assets can, and should, have an estate plan. Your CPA can guide you and help you make good decisions on all these questions.
8. Be aware. Be involved in your financial good health. Keep your credit history clean, pay attention to your credit reports and know when something changes. Resolve to check your credit reports at the beginning of each year. Keep a close eye on your bank account statements and credit card statements so you know when something is amiss.
9. Get help when you need it. An occasional check-up from a CPA can help you make sure you’re on the right path to achieving your goals. Know when you can go it alone and when you need a few tips from the experts.
10. Get smart. And just because you may turn to an expert for advice doesn’t mean you should leave all of the important decisions to someone else. Educate yourself about your financial situation and different investment options. Take a class, read or talk to others. Know enough to take an active role in your finances.
A CPA Can Help
A new year brings new opportunities. It’s the perfect time to evaluate your financial position, set new goals and make changes as needed. It can be a fresh start to a new financial future.
If you have questions about improving your financial position, a CPA can help. He or she can provide the advice you need to make the best financial.
If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.