Liz's 5 New Year Financial Tips

Happy New Year! This time of year brings hope to everyone, even those who are struggling or out of work. We all need hope.  But sometimes we find ourselves in financially difficulty due to lack of discipline and lack of planning. Yes ladies and gentlemen, being financially fit is just as important as being physically fit. So we all need to be mindful to slim that excess spending line and boost bottom line! Right?! Right.

To protect and prepare yourself, here are a few resolutions to consider:

1. If you have small children, start funding college 529 plans early. A coveted education at Harvard University this year cost $53,000 and college costs never go down. Start saving for Bobby and Bonnie in a tax-deferred 529 as early as possible, preferably right after they're born.

2. Here's an easy one. Start teaching your children about the importance of hard work and money when they are small. House chores and an allowance go hand in hand and are great tools for setting the foundation for "responsibility". I see today's children demanding and getting. When parents easily give them without teaching, explaining and discipline, it's much harder down the road when that parent loses a job and children don't understand and are still demanding. It places tremendous anxiety on the parent. Don't let your children fall into that "entitled group".  When I was a single mother with two daughters, and struggling, my eldest daughter understood. When she started working after college, she helped me with the mortgage. We had few luxuries and no vacations and no eating out, but we had a home and food and eachother and more importantly no debt or creditors breathing down our necks. Our stress levels were better than most people in our situation, and so was hour health, thank God.

3. Lower your mortgage payments. Interest rates remain at historically low levels, with the 30-year fix-rate mortgage now below 4% for qualified buyers. If you haven't already, now is the time to lower your monthly payment by refinancing our current mortgage at a lower rate.  Homeowners, even those in hard-hit markets such as Florida, Arizona and Nevada who owe more on a mortgage than their home is worth, will have a better chance to refinance through the government's Home Affordable Refinance Program, or HARP, which has been enhanced and extended through the end of 2013. Even one percentage point can save you roughly $140 a month ona $250,000 mortgage.

4. Save More for Retirement. My customers who have been with me for years knew this was coming. Disappearing are pensions, and stock in companies are devaluing and that is dangerous if you placed all your eggs in one basket.  The government has boosted the maximum you can set aside in a tax-deferred 401(k) account in 2012 by $500 to $17,000.  How to do this? Raise the percentage taken out of your paycheck to ensure you take advantage of the new higher savings limit.  If you get a raise, or received a bonus, deposit it straight away into 401(k) if you have not reached your maximum. 

Other solutions: Stop spending foolishly.  You don't need the latest iphone or flatscreen TV  or video games or eat out every other night. Start saving money for emergencies like job loss or unexpected car repair or medical bill.  The recommendation is to save for three month's worth of expenses in case you lose your job. But in this recession, I recommend saving 6 months worth. Yes you can do it. It does take sacrifice.

If you're not disciplined enough to save, have the money deducted automatically from your paycheck into savings account.

5. Don't Invest on News Headlines.  Homework pays not headlines.  Constant homework and research will give you the advantage. By the time activity reaches the headlines, it's actually old news and millions of people have already bought or sold the stock. If you missed the boat, wait it out. Long-term usually sees a rebound. We can't promise but as you know the 20 year cycle of any stock sees gains.

I hope these tips helps. And please do not hesitate to contact me for upcoming tax season. Like my client's say "It's like getting a Mercedes at a Ford price". I'm a CPA that offers mom and pop prices. You have enough to worry about. I love accounting and numbers and so I can take the burden from your shoulders.


Happy New Year!


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