Are you spending too much and saving too little? Do you not even know where your money is going? If the answer is yes, it’s time to get your financial life in order.
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Even if you’re doing well financially, the beginning of the year is a good time to take a look at your savings, your spending and your processes to see what can be improved. Do you have life insurance, disability insurance, health insurance and a college fund for your kids? Is your portfolio allocated the way it should be for today’s market? Are you making enough money to cover your living expenses?
Keeping your financial house in order is a continual process – much like keeping the home you live in clean. Some organization on the front end makes it more likely you’ll be able to accomplish your financial objectives.
Here are 10 things you can do to get your financial life in order in the new year or any time.
1. Max out your 401(k) and IRA contributions
You definitely want to contribute what it takes to get the maximum employer match because it gets you free money. (Where else can you get that kind of return on investment?) But don’t stop there if you’re able to contribute more.
In 2024, employees can contribute up to $23,00 (plus $7,000 more if they’re 50 or older) to their 401(k) retirement funds. The self-employed should be contributing as much as they can toward retirement through avenues such as IRAs and SEPs. “If you’re not maxing out, add a percentage,” says Liz Weston, personal finance columnist and author. “Just set it up and get it going.”
2. Make a will and review your estate planning
No one wants to think about death, but you don’t want to leave your family in the lurch if something happens. Make an estate plan and be sure to designate who will take custody of your children, who will inherit your property and who will make decisions for you if you become incapacitated.
Then make sure your family knows where to find this information as well as your other financial information, including passwords for online accounts. That’s right — you also need to plan for your digital estate, from your Facebook account to your intellectual property. New online tools make it easier to gather your information all in one place.
3. Increase your savings
If you’re putting $50 of each paycheck into savings, bump it up to $55 or $60. Change your IRA contribution from 10% to 11%. By making modest adjustments, you won’t miss the money, and you can build up your emergency fund, retirement savings or children’s college funds.
Weston advocates setting up savings buckets for specific expenses, such as a new car, vacation, home renovations or emergency fund. Some banks will allow you to create subaccounts to make this easier. “It’s so nice to know that these expenses are covered,” she says.
4. Automate your savings
We all think we should save more money, but, the truth is, few of us do. One of the easiest and most effective ways to increase savings is to automate the process. That could be having money withheld from your paycheck and deposited in a savings account or scheduling regular transfers from checking to savings or retirement accounts. If the money is taken out before or just after you receive your paycheck, you don’t have time to spend it before you can sock it away.
5. Create a budget
It’s hard to plan if you don’t know where your money is going. Creating a formal budget also makes it easier to set goals, and then reach them. You can do an old-fashioned paper budget, use a spreadsheet or use an app or computer program. (Many used to be free, but most have moved to a subscription model.)
6. Organize your finances
If you’re still doing tax planning by throwing receipts in a shoebox, maybe it’s time to improve your process. That could include using online or computer bookkeeping software, automating bill payments or creating a process that enables you to see your income and spending more clearly, such as using a program like Quicken or an online tool like Mint.com.
7. Ask for discounts
Call your cable company, cellphone service provider, car insurance provider and other services for which you pay a monthly fee and ask if they can give you a better deal. Cellphone and cable packages change all the time, and the companies won’t offer you a better plan if you don’t ask. If you’re paying private mortgage insurance on your home and you think you now have more than 20 percent equity, ask to have it removed, suggests Carrie Rocha, founder of Pocket Your Dollars.
8. Pay off debt
Are you still paying off student loans? Do you have credit card debt? The sooner you can pay off debt, the sooner you can put that money toward future goals. Plus, you’ll pay less in interest.
Also, take a hard look at how you got into debt. “Credit card debt is expensive,” Weston says. “It’s a sign you’re living beyond your means.” Make a plan to change your bad spending habits, wipe out debt for good and to stay out of debt going forward.
9. Make your charitable deductions automatic
This is helpful to the charities, which need money all year, and also helps you be more deliberate in your giving, Weston says. It allows you to plan for and maximize your charitable actions. Plus, it makes it easier to remember your deductions at tax time.
10. Pay your bills on time
Any money that goes to late fees is money wasted, and late payments can also hurt your credit score. If you’re missing bills, set up a system that enables you to pay them when they’re due. That could include putting automated reminders in your calendar, signing up for alerts or setting up autopay options using bank accounts or credit cards.
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