It is that time of the year again to make your New Year’s resolutions! Each year most people decide on a number of changes to make for the coming year. How about including your financial life in this year’s resolutions. Let’s take a look at some ideas.
Investigate 401k Employer Matching Contributions: Most 401k plans provide for employer matching contributions. The match consists of the employer contributing a certain dollar amount to your 401k account based on the dollar amount you contribute. For example, your 401k plan has a dollar for dollar employer match up to $1500. For every dollar you contribute to your account, your employer will also contribute the same amount to your account. Once you have contributed $1500, your employer will stop contributing. Think about it – you put in $1500 and your employer puts in $1500, now your 401k account is worth $3000! That is called ‘free money’ from your employer. Each plan is different so you need to check with your Human Resource manager to determine about your employer’s matching contributions.
Start A Savings Account: Are you always having problems saving? A good solution is to have a set dollar amount automatically taken from your paycheck and deposited into a separate account. This account can be a saving, money market or mutual fund account. Start off slow, $25, $50 or $100 each month. Come June, you should double the amount. If you deposited $25 a month and double to $50 in June, by this time next year you will have $475 extra. Your deposit amount is less than a dollar a day which is less than one McDonald’s coffee a day. Put away $50 a month, double to $100 in June, and you will have $950 at the end of the year. For those able to save $100 a month, then double to $200 in June, a total of $1900 will be your savings for the year.
Track Your Expenses: Not sure what you and your family are spending on all those expenses? Also, do you have trouble staying on those day-to-day budgets? Try this tip:
Day 1: Spending no more than 30 minutes, write down all your monthly fixed expenses (examples include: mortgage/rent, internet, and car payments) and what dollar amount you spent on each. Do this first step from your memory.
Day 2: Again no more than 30 minutes, look through your checkbook and see what monthly expenses you have forgotten and correct any amounts you misquoted on Day 1. Also, add in any monthly variable expenses (examples include: clothing, groceries, car maintenance and fuel, and home utilities such as electricity, gas/oil and water).
Day 3: Still just 30 minutes, pull out those credit card bills and come to terms with what and how much you charge on your credit cards. Plus, be sure and note all finance charges and late fees.
Day 4: Pull all those expenses together and see if there are any revelations. At this point, you have some good information. Now, you have the choice to modify your spending habits.
These financial tips can begin with the New Year and last a life time!
Kimberly J. Howard, CFP®, CRPC®, ADPA® is a Certified Financial Planner and the owner of KJH Financial Services, a Fee-Only practice located in Newton, MA and Denver, CO (781-413-4879). Please visit us at www.kjhfinancialservices.com