Jan 8, 2004

Financial resolutions can improve your life

Taking a fresh look at your finances in January gives you the opportunity to implement savings strategies all year. The California Society of CPAs (www.calcpa.org) offers the following checklist to help you assess and take charge of your financial future.

1. SET CLEAR GOALS
Establishing financial goals should be the first step in the financial planning process. Commit your goals to paper and then plan and prioritize objectives for achieving them.

2. RESOLVE TO SPEND LESS
Spending less than you earn is the key to being able to save and invest money. Continually look for ways to cut your expenses and/or increase your income. Trying to live beneath your means should be a priority.

3. CREATE AN EMERGENCY FUND
CPAs recommend that you have three to six months of living expenses that you can easily tap in the event of an emergency. Many people select a savings account for their emergency funds. If your balance is high enough, you may be able to open a money market account or a money market mutual fund that pays a higher rate of interest and still allows ready access to your funds.

4. MAKE SAVING A PRIORITY
The best savings strategy is to set aside money before you have the chance to spend it. Some employers offer automatic savings plans that deposit money directly from your paycheck into a savings account or tax-deferred retirement plan such as a 401(k). There are also many brokerage companies with programs that allow you to invest as little at $25 or $50 a month through automatic deductions from a savings or checking account.

5. REDUCE HIGH CREDIT CARD DEBT
If you're carrying high credit card balances, make debt reduction your first financial objective. Consider consolidating your debt on one low-interest credit card and making the highest monthly payment you can manage. For several months, only make purchases that you can pay with cash.

6. EVALUATE YOUR INSURANCE COVERAGE
Ensuring that you have adequate insurance coverage is vital to protecting your family and your assets. Key policies to review include health, disability, life, automobile, and homeowners' insurance. Make a checklist of your policies and the amount of coverage you have. Determine whether changes in your financial and family life warrant adjusting coverage. For example, if you recently started a business in your home, you may need to augment your homeowners' insurance to protect equipment or other related items.

7. THINK TAXES
Effective tax planning is a year-round endeavor. Developing long-term tax-savings strategies is the key to keeping more of what you earn. Now is a good time to consider the impact of taxes on your investment and savings strategies for 2004.

A CPA can help you create a comprehensive tax plan as well as offer advice on how to improve your overall financial position. Consult your CPA to make the most of your money in 2004.