Wednesday, 7 Jan 2009

Start the Year Off Right

 

Happy New Year!
Creative Commons License photo credit: sixty69niner

The turning of the calendar to a new year can provide motivation and a fresh start. Leave all your financial garbage behind in 2008. Instead of making resolutions, take action to improve your finances for this year and the years to come.

  • Set up a Christmas account – Congratulations if you did all your Christmas spending with cash (or paid your credit card bill in full). Most people don’t. So avoid disaster by starting to plan now. Tally up how much you spent (or would like to spend) and start putting aside a little with each paycheck. Personally, I like ING (you can sign up to the right if you don’t already have an account with them) because they allow for multiple sub-accounts. Simply, create a new account entitled ‘Christmas fund’ (or similar) and set up automatic withdrawals from your checking account. When December rolls around again, you’ll feel no stress because you’ve already got it covered.  

  • Set up a freedom fund – This is similar to the Christmas fund but for any irregular expenses you incur throughout the year – i.e. car insurance, homeowner’s insurance, property tax. Add up the yearly amount you’ll need to pay and divide by your amount of paychecks. This is how much you should set aside each pay period. When those expenses occur, you can merely transfer the necessary amount from your savings rather than stressing how you’ll come up with the cash to pay the bill.  

  • Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.
     

     

  • Automate your retirement savings – Don’t leave your retirement to chance. The IRA limit for 2009 has increased to $5000. This is $416/mo. Go ahead and set up an automatic withdrawal now. Technically you have until April 15, 2010 to fund your 2009 IRA. If money is tight, deposit $333/mo from February 2009 to April 2010.  

  • Adjust your withholdings – If you’re getting a big tax refund every year, you’re giving the government an interest free loan. The IRS withholding calculator (you’ll need your last paystub handy) will tell you how many exemptions you should be claiming. This will increase your cash flow without much effort on your part.  

These are simple steps that can be accomplished in an hour or two but will improve your finances for a lifetime. What steps are you taking to gain better control of your finances this year?

 
 

 

 


Comments are closed.