Take charge of your budget in five easy steps.
As we usher in a new year, many people will resolve to get fit or lose those last 15 pounds. Taking better care of your body is certainly a commendable new year's resolution, but let's not overlook our finances in the process. With that in mind, here's a look at five ways to get your finances in shape and your money in order for 2014 and beyond.
1. Go over last year's spending.
Before you create a plan for 2014, think about your goals from the previous year and see if you met them, suggests Wendy Weaver, a certified financial planner and portfolio manager at FBB Capital Partners in Bethesda, MD. "Do I have the amount in my savings account at the end of the year that I'd planned on?" she asks. "Setting up the plan and evaluating at the end of the year is really important." From there, you can consider ways to cut back your spending in 2014, if that’s your goal. "What are your required expenses and what are your expenses that are nice to have?" Weaver asks. "In the nice to have column, where can you cut back even a little bit?"
2. Automate your savings.
If you wait until the end of the month to transfer money to your savings account, it's all too easy to make excuses or spend that money mindlessly. Automatically sending money to another bank account earmarked for savings or as an emergency fund makes saving foolproof. "If your employer allows you to make deposits into two different bank accounts, you should," Weaver says. Also take advantage of automatic retirement contributions if available, especially if you get an employer match for participating.
3. Review your insurance and estate plan.
Make a habit of reviewing your insurance policies each year, especially if you've gotten married, divorced, or had children and need to add more coverage or update your beneficiaries. Weaver suggests you "look at how much coverage you have, not only for life insurance, but also disability insurance." Is your home and your car properly insured too? While you’re at it, revisit your estate plan to make sure it reflects your current wishes, including who can make medical or financial decisions for you in case you become incapacitated and who should take care of any children you might have. If you don’t have a will, make it a goal to get one in 2014.
4. Adjust tax withholding.
Make sure the tax withholding from your paychecks is appropriate to your needs in 2014 so you won't owe a huge tax bill or get a huge refund (some people call refunds an interest-free loan to the government). "Reviewing your tax withholding is important, especially if you've had any changes in your life: you've gotten married, gotten divorced, or moved into a different income bracket," Weaver says.
5. Revisit your retirement contributions.
Haven't started saving for retirement yet? Join your company's retirement plan if it offers one or set up an IRA. If you're already saving for retirement, consider boosting your contributions by a few percentage points. That small tweak can amount to a sizable nest egg over time, and you probably won't miss the money now. This is also a good time to "make sure you have a good balance between stocks and bonds according to your investment goals and time horizon," according to Weaver. Some plans automatically shift to a more conservative investment portfolio as you near retirement age.
More juicy content from Credit Sesame:
- Why Monitoring Your Credit Reports Is Crucial to Your Financial Health
- Getting Ripped Without Getting Ripped Off
- The High Cost of Having a Bad Credit Score
Originally for Credit Sesame by Susan Johnston