Smart Spending

Secrets to Keeping Your 2012 Finances On Track

Now that the groundhog saw his shadow, it’s time to recommit to getting your financial house in order. Here are 5 things that you should be doing now to keep your 2012 finances on track:

  1. Start saving for retirement – If you aren’t saving anything for retirement right now, then it’s time to either enroll in the retirement plan offered by your employer or else open a Roth IRA-or both, if you can afford to contribute to each of them. Be sure to take advantage of any matching contributions offered by your employer, because this is free money to you. If you can only fund a Roth account, then it will take $416.66 per month to make your maximum annual contribution of $5,000, or $500 per month if you are over age 50 and can also make the additional $1,000 catch-up contribution. You may also be eligible for the Retirement Saver’s Tax Credit if your income is below a certain level.
  2. Pay off your credit card debt – If you have high interest debt on credit cards, pay this off before anything else. Those who carry large balances on their credit cards damage their credit in several ways. First, the credit rating agencies don’t like to see large card balances, particularly when most or all of the available credit limit is being used. Furthermore, the amount of interest that credit card companies charge leaves you less money to pay off principal or other debt.
  3. Refinance your mortgage – If you haven’t done this yet and your credit is good enough to let you refinance, use this historically low interest rate environment to get a better rate on your loan. Rates now may be low enough to let you switch from a 30 to a 20 or 15 year loan, which will save you many thousands of dollars in interest paid over the life of the loan.
  4. Start a college education fund – If you have not begun saving for your kids’ education yet, now is the time to start. If you can even save enough to get them through a year or two of college, then that will drastically cut down on the amount of loans that they will need to finish school. There are several different types of college savings accounts, such as 529 plans, Coverdell Education Savings Accounts and custodial accounts. Each type of account has its own set of tax and distribution rules.
  5. Create a budget – This may be the most important resolution of all, because it can help you to follow through on all of your other resolutions. Knowing where all of your money goes can help you to start spending and saving your money much more efficiently and control your financial future. There are several websites and programs that can help you do this such as Microsoft Money or Budget programs can also send you email alerts reminding you of upcoming bills and amounts that are due at irregular intervals.