The year is already half over … how have you done in regards to your New Year’s resolutions?
Saving money is number one on most peoples’ list, yet very few actually achieve this goal. The good news is that it’s never too late to work on your personal and business financial position, and just because it’s been six months since making that resolution, it doesn’t mean you can’t start fixing things – right NOW.
Whether you are well on your way to financial prosperity, or will only be getting started after reading this article, here are eight handy tips that will improve your finances before the end of the year.
1. Live within your means. Although it is more exciting to spend lavishly and have a lot of nice things, it is much smarter to live within your means. You don’t want to be living paycheck to paycheck, or even worse, using credit cards for general living expenses. Unless you make a conscious effort to spend less than you earn you will never get ahead. If you’re living beyond your means, whether you’re on an annual income of $200,000 or $20,000, you’ll be in the same boat.
2. Define your savings goals. Instead of a general ‘I want to save money’, specific goals with figures and deadlines work best. If you’re wondering whether to splurge out on an expensive, new T.V., knowing that the $2,000 asking price could instead make a huge contribution to that down payment you’ll need in a few months will lessen the temptation to splurge. An intangible ‘I need to save money’ doesn’t give you the same power to resist temptation. Everybody responds differently, but in general you should sit down and write a list of your needs and goals. Appropriate goals would include an emergency fund (equivalent to at least six to nine months of living expense), a house down payment, medical expenses, college fund, baby fund, retirement fund, etc. If a fancy new T.V. is truly one of your goals, put it on the list too. Many people don’t realize that a few dollars here and there really adds up, but these are the same people who seem to be relying on that one in ten million chance of winning the lottery to provide for their future.
3. Invest in mutual funds. Don’t leave your hard-earned savings sitting idly in a passbook savings account. Invest your money in a mutual fund which has a much better return.
4. Open a Roth IRA (if you qualify). If you follow the rules correctly, with a Roth IRA you don’t have to pay tax on any gains you receive. Start one for your children by ‘hiring’ them once they reach working age, paying them $5,000 a year, and then investing that money in the IRA.
5. Slash credit card debt. In the U.S., credit card debt is at an alarming level – and generally has an extremely high interest rate. If you have a credit card, pay it off in full each month – never leaving an amount to carry forward to the next month.
6. Set up a trust and a will. Only 50 percent of Americans have wills! Without one, someone else gets to decide how your assets and funds are distributed after you pass away. Set up a trust account for your family and make a will to properly divide up your assets.
7. Insure, insure, insure. Many people do the right thing and take out insurance coverage. The problem is, needs and circumstances change over time. At least once a year, review your current level of insurance to make sure that it is sufficient to protect you and your family if the worst should happen. Some of the indicators that your level of insurance should be adjusted are taking on new debt, additions to the family, significant purchases such a taking out a mortgage, etc.
8. Don’t throw your money away! This tip may not apply to you since you are a client of ours but a lot of individuals aren’t aware of the different tax breaks available to them. The tax system may seem confusing, but you can always seek professional advice to find out what you are entitled to. Business owners are often the ones who overpay on their taxes each year. Make sure you research the tax breaks to see which you are entitled to, and keep up-to-date with any new tax breaks introduced.
Whether you have $1 in your bank account, or $100,000, these financial tips will certainly make a difference to your financial well-being. Don’t wait until January 1 to re-establish a New Year’s resolution, start today … start right now!