Yep, the holidays are a busy time of year full of distractions that can easily draw you away from your financial game plan. You do have one, right? Here is a basket of tips from my colleagues to give you a head start on your finances for 2016. There’s even an opportunity for you to share your own financial tips with our readers in my column next week and win a prize.
Do meal plans; save money. Write down a weekly/monthly meal plan before you go grocery shop. Only buy what’s on your list, and then stick to what you planned for lunch/dinner. It will also make you feel less stressed to be able to easily answer the looming “what’s for dinner?” question. This will save you lots of money! Use part of your savings to start a savings plan. If you saved $5 per week for one year, your total savings for the year would be over $250 and you won’t even miss $5.00 per week! – Andrea Messick
Be a smart shopper. Challenge yourself to not make any unnecessary purchases. Before buying an item ask yourself if the purchase will be worth it a year from now. – Ramona Boehm
Leverage your pay raise. Set aside a portion of any compensation adjustment to help fund your 401K or IRA / Roth. – Greg Weyandt, CPA
Change a habit. Stop a bad habit that negatively affects your health and your wallet i.e. smoking cigarettes and eating fattening foods. – Marshall Clay, JD, CFP
Invest in yourself by getting in shape. Regular exercise has been shown to reduce stress, make you more productive at work, reduce sick days and improve self-esteem. Plus you might meet your next client, referral source or employer while working out. Accountability is the key to success. Find a friend who has similar goals and commit to work out together as ‘accountability partners’. You’ll be more likely to reach your goal and develop a special bond with the person as they reach their goal too. – Michael Wagner, CPA, CFP
Leverage your year-end bonus. Use your Christmas bonus to pay off credit card debt, start an emergency fund, or fund a Roth IRA. – Callie Jowers, CFP
Rebalance your portfolio. Take a moment to rebalance your company retirement account’s asset allocation to your target allocations. This insures that you are not taking more risk than you intended. Also, given a possible rising interest rate environment, consider paying down loan balances in advance? – Woodard Peay, CFP, MBA
Build an emergency reserve…the easy way. If you set aside just $5 every couple of days (price of a Starbucks), you’d have about $1,000 for an emergency reserve fund. – Wendy Weber
Use the “back door” Roth IRA strategy. If your adjusted gross income (AGI) exceeds the Roth Contribution Limits for 2015 make a nondeductible IRA contribution (no income limitations) then convert to Roth (also no limitations). CAUTION: if you have other IRAs you will have to prorate for taxes. To avoid this tax problem, see if your company 401k plan will allow you to roll-up your existing IRA into your plan. Be sure to discuss this strategy with your tax advisor before implementing. – Hugh Smith, CPA, CFA, CFP
Track your money. Try uploading all of your accounts into a website like www.Mint.com. If you are really diligent, you may track spending and create a budget. If not, you can at least track your net worth to see if you are trending up, treading water or spending down your assets. – Foster Hyde, CFA, CFP
My Challenge to You!
- Take action now. Choose two or three of these ideas to implement now. Creating financial success is about doing the little things right, consistently, over a long period of time.
- Join the game. Email me (Stewart@welchgroup.com) your own ideas to share with my readers. If I use your recommendation, I’ll send you a signed copy of my soon-to-be-released book, “THINK Like a Self-Made Millionaire”. Be sure to include your mailing address.
Caution! Do you own an inherited IRA? Michael Wagner, CPA and partner in The Welch Group, reminded me that those of you who have inherited IRAs must also take a Required Minimum Distribution from that account before December 31st, 2015 or face a potential 50% federal penalty. I’ve made numerous references to RMD requirements for those of you who are age 70 ½ or older but had never mentioned the requirement for those of you with inherited IRAs no matter what your age. While most brokerage firms automatically notify age 70 ½ or older customers of both the requirement and the amount of the RMD, most provide no notice (or amounts) for inherited IRA customers. You’ll have to figure the amount due…typically based on your life expectancy using the IRS tables