End of Year Financial Strategies

A new year will arrive in one day.  Many people have made a list of New Year’s Resolutions. I hope that one of your resolutions is to improve your finances even if you are good with managing your money.  Finances are a huge component of your life. Finances can destroy relationships; result in divorce, arguments, sadness, depression, anxiety, fear, health issues and unemployment. Finances must be properly managed which requires eradicating poor spending habits. 

One way to exterminate bad spending habits is to set financial goals that you know you will be able to achieve. Make a promise to yourself that you will do at least one thing to become better at managing your finances.  Ensure your goals are positive statements. A goal should be similar to an affirmation, i.e. I will pay off my Visa bill by March 2015 instead of an uncertain or negative goal such as, I hope I can pay off my Visa bill by March 2015 or I will try to pay off my Visa bill by March 2015. Here are 21 easy ways to help you improve your finances in 2015.

• Assess coverage needs.  Determine your needs for insurance such as life, health, auto, homeowner’s/renter’s, disability and long-term care.  Make adjustments as needed on a yearly basis or when a life event change occurs such as death, long-term illness or childbirth.
• Assess home needs. Evaluate all your household items to determine if the lifespan of the item has expired. Verify if you can repair broken items or need to replace them - this includes cars, appliances, electronics, mobile devices, etc.
• Know your worth.  Know your net worth (assets - liabilities). Verify your net worth annually. Know how much you earn, how much you owe and how many assets you own. Your net worth should increase on a yearly basis. 
• Focus on long term growth. Consult a professional to ensure you are on target to meet your retirement goals and to help you make any necessary adjustments.
• Check taxes. Consult a tax attorney or CPA to ensure you minimize tax liabilities and position yourself to take advantage of tax credits and benefits.
• Income sources. Identify all sources of income and the total earned from each monthly. Identify if they are variable or fixed income sources. Include fixed income sources in your budget.
• Project income. Project your monthly income based on your average monthly income for the past 12 months. Use your lowest monthly income to project income and give yourself some wiggle room for unexpected expenses and income fluctuations. Use this as a guide to project your budget for next year.
• Evaluate. Identify things that were hard and things that were easy to do regarding your finances. Review lessons learned and make improvements for next year. Change the way you think about money. If you believe you will always be in debt or always be broke you will.  Be grateful for what you have, it could be worse.
• Develop a Plan (Budget). Write a list of your entire total monthly expenses including debt and write down your total monthly income after taxes.  If you do not have any money left over (at least 10% of your monthly income) look at the areas where you can reduce spending.
• Pay with cash. Pay for purchases with cash until your credit card balances are paid in full. If you pay for an item with a credit card you end up paying 2-3 times the original cost of the item.
• Spend less.  Reduce spending by 30-50% each month. You should always have extra money left over each month after you pay your monthly expenses; if you don't, change your spending habits.
• Save. Do at least one thing a week to save money, i.e. bring your lunch to work, buy generic brands or bring coffee from home at least one day a week.  
• Plan for the unexpected. Create an emergency savings fund to cover all of your monthly bills and expenses for 9-12 months.
  Get Out of Debt. Get current on any late payments. Negotiate with creditors to setup payment plans and pay off all debts. Keep debt (excluding rent/mortgage) at 15% or less of your net monthly income (after taxes).
• Develop What If Scenarios.  List different financial scenarios that could happen and how you would handle each one, i.e. job loss, sickness, death, new baby, loss of health insurance or other benefits, car repair, etc.
• Estate Planning. Create a will and trust to ensure your children and/or other family members are cared for after your death.
• Know the law. Know the financial laws in your state for foreclosure, bankruptcy, divorce, child support, retirement, debt, etc.
• Automate. Pay bills online to prevent late payments, late fees and damage to your credit. Setup automatic withdrawals to contribute to a savings account.
• Diversify. Control your risks by investing in various mutual funds that are a combination or low, medium and high risk to limit your losses and maximize gains.
• Reconcile. Balance your checkbook and write down every transaction, including check card or debit cards transactions and trips to the ATM.
• Consult a professional.  Contact a financial advisor or financial planner to help you determine your financial goals, where you want to live, the age you want to retire and the lifestyle you would like to have when you retire.