Even if you’re not born into wealth, you can still become wealthy.
Regardless of your financial situation or education, building wealth boils down to three things: Saving, resourcefulness, and maximizing income, according to William D. Danko, coauthor of the best-seller “The Millionaire Next Door.”
His latest book, “Richer Than a Millionaire,” posits the idea that true prosperity is the convergence of good health, happiness, and wealth.
In a recent Q&A with the Washington Post, Danko was asked for his best advice for building wealth “regardless of financial situation and education.” Danko said:
“First, commit to saving 20% of your income. Currently, most save about 5%. It is hard to get ahead and be an investor without saving first.
Second, be a good steward of your resources. This includes having stable personal relationships, and good personal habits. These behaviors will lead to a longer life, and more compounding opportunities.
Third, consider having more than one stream of income. A second job can be beneficial.”
Committing to saving your income is part of setting financial goals. In fact, it’s the key to building any wealth at all, Business Insider previously reported. Specifically, 20% should be put toward an emergency fund, retirement, and paying down debt.
Danko calls it a “stretch goal” — you may not be able to save that much now, but it’s what you should aim for.
“If you earn and spend everything, you cannot build a significant financial net worth,” he said in the Q&A. “You must practice self-imposed financial scarcity. So, if you make $100,000, create a lifestyle that only requires 80% of this, and save/invest the rest.”
Research backs up Danko’s point that having a healthy personal life will lead to a longer life — studies show that fostering friendship is key to aging well and boosting happiness, Business Insider’s Erin Brodwin reported. And so do personal habits, like tweaking your diet and getting the right kind of exercise.
Finally, the more income you’re generating, the more money you’ll be able to save, so long as you don’t fall victim to “lifestyle creep.” This will also help you generate passive income, which one financial expert called “the holy grail of ways to make money.”
In fact, one Business Insider contributor has seven separate streams of income, from blogging to real estate, and he says it means he’ll never stop earning money.
Re-posted from MSN.COM
The crushing weight of student debt and the Great Recession have shaped millennials’ relationship with money, for better or worse. In some, it has created enough anxiety about financial security that they save as much as they can and avoid any type of credit agreement that could cause them to take on more debt. Others become so preoccupied with their present expenses that they fail to save for the future.
Unfortunately, both approaches have their drawbacks. Here are a few of the most common money mistakes millennials are making — and what you can do to fix them.
1. Not preparing for the unexpected
About 46% of millennials don’t have any money set aside in an emergency fund, according to a 2017 survey by GOBankingRates. This can pose a problem when an unexpected event like a home repair, a costly medical bill, or a sudden job loss puts an extra strain on your budget. Without any savings to cover these financial emergencies, you may have no choice but to take on debt or fall behind on your rent or mortgage payment and other bills, which can have a serious impact on your creditworthiness.
Most experts recommend keeping at least three to six months’ worth of expenses in a savings account to help cover unexpected expenses. Look at your monthly bills and calculate how much you would need to cover them. Then multiply that number by three (or six if you want to be extra safe) and create a weekly savings goal to help you reach it.
2. Avoiding credit
Only 1 in 3 millennials owns a credit card, according to a recent study by Bankrate. While it’s wise not to overuse credit, avoiding it entirely can pose problems, especially when you go to buy a home or finance another big purchase.
Just about everyone will apply for a loan at some point in their lives. When you do, your lender will pull your credit reports to assess how responsible you’ve been with your money in the past. Your credit reports contain information on all active credit accounts in your name, but if you don’t have any, you’re not giving lenders anything to go on. This can make them hesitant to work with you, and they may deny your loan application or charge you a higher interest rate than someone with a well-established credit history. If you’d like to become a homeowner someday, then a nonexistent credit history will be a major obstacle.
You don’t have to use credit cards, but it is important to build up your credit history in some way. Paying off student loans can help, and if you take out an auto loan or personal loan, these will appear on your credit report as well. But for many, credit cards are the ideal credit-building tool because you can use them regularly, and as long as you pay the balance in full each month, you won’t have to pay any interest at all.
3. Not saving for retirement
For many millennials, paying off student loans is a much more pressing concern than saving for retirement. After all, they have 30 to 40 years left to work, so what’s the big deal if they put off retirement savings for a few years?
The trouble is that your most valuable retirement contributions are the ones you make while you’re young. The sooner you put funds in a retirement account, the more compound interest can make them grow. When you get a late start, your money has less time to gain interest before you need to start using it.
Say you put $10,000 in a retirement account when you’re 25 years old. Assuming your investments earn 8% per year, that $10,000 will have grown to $253,000 by the time you’re ready to retire at age 67. If you waited until age 35 to put that money in, it would only grow to $117,000. And if you waited until 45, you’d end up with only $54,000.
Waiting to start saving for retirement may not seem like a big deal, but it can mean a difference of hundreds of thousands of dollars. If you have any extra money left over after you’ve paid your bills each month, put it into your 401(k). If your employer doesn’t offer one, then open an IRA.
4. Spending frivolously
Millennials are more likely to indulge their immediate wants than baby boomers and Gen X-ers are today. In a survey by Schwab, 60% of millennials admit to spending more than $4 on their coffee (though it doesn’t specify how often), and they’re more likely to eat out and spend money on clothing and electronics they don’t need. While it’s healthy to indulge these wants occasionally, doing it frequently can take a large chunk out of your budget, leaving you less money to put toward retirement and your emergency fund.
Take a good look at how much you’re spending on the non-essentials each month and look for areas where you may be able to cut back. Making your coffee at home, rather than purchasing it at your favorite chain, will save you over $1,300 a year on average. This assumes that an average cup of Joe from a cafe is $4, while the cost of making a cup at home is $0.17, and you are drinking one cup per day. Dining in and curbing your shopping could free up even more money.
For millennials, it’s all about maintaining a balance between what you need now and what you’ll need later. By remaining mindful of how your present decisions are impacting your future finances, you’ll be able to make smart choices that will serve you well today and in all of your tomorrows.
Re-posted from CBS News.Com
After preparing your 2017 tax return and finding out that you still owe Uncle Sam, it’s natural to feel some regret over things you could have done before the end of 2017 that could have lowered your tax bill. For example, if you contributed less than $18,000 to your employer’s 401(k) retirement plan last year, you can’t go back and make that contribution now.
But in certain situations, taxpayers can still do some things now to reduce their gross income on their 2017 tax return.
For instance, workers can make tax-deductible contributions for last year to several types of retirement savings accounts, even though the contributions are made this year. Here’s the list of these accounts, how much you can contribute and the deadline for doing it.
Traditional and Roth IRAs
You’re still allowed to make a 2017 contribution to these accounts if you do so by the due date for filing your 2017 tax return, which is April 18 this year. But this deadline doesn’t get extended when you file for an extension until Oct. 15. This deadline also applies to opening a new IRA.
The maximum contribution you can make to an IRA for 2017 is $5,500. You can add an additional $1,000 if you were over age 50 on any day in 2017. Whether you can claim a deduction for an IRA contribution depends on your adjusted gross income. If you’re single and your AGI is over $62,000, you’re allowed a partial deduction. But if your income exceeds $72,000, the IRA deduction is completely phased out. The AGI limits for marrieds is $99,000 and $119,000.
Health savings accounts
For a growing number of workers, a health savings account, or HSA, is a much.
An HSA is a special account that allows you to save money that can later be withdrawn tax-free to reimburse yourself for medical expenses. Best of all, money you contribute to an HSA is tax-free on the way in, grows tax-free and is tax-free when you take it out to pay for qualified medical expenses. No other long-term savings account allows this.
HSAs are so valuable that I advise clients that after they take advantage of the matching contribution in their employers 401(k) plan, they should make the maximum contributions to an HSA before saving money in another account or plan.
You can still make a 2017 contribution to an HSA if you do it by the April 18 filing deadline. Again, this deadline doesn’t get extended when you file an extension. Contributions for 2017 are also allowed even if you didn’t open the HSA in 2017. You can open one now, make the 2017 contribution and take a deduction for it on your 2017 tax return.
To contribute to an HSA, an individual must have been covered last year under a health insurance plan with an annual deductible of at least $1,300, or $2,600 for a family plan. The maximum annual HSA contribution in 2017 is $3,400 for individuals, $6,750 for a family. Those age 55 and older can contribute an additional $1,000.
This retirement plan allows the self-employed to make generous contributions both as an employer and as an employee. You can make two types of contributions to this plan. As an employer, you can contribute a percentage of net profit. As an employee, you can contribute a fixed-dollar amount up to the employee 401(k) contribution limit ($18,000, or $24,000 for those over age 50 in 2017).
This plan works best for a sole-proprietor with no employees. That’s because if you have any employees age 21 or older and who work at least 1,000 hours per year, you’ll have to also open accounts and make similar contributions for them. Finally, you will need to establish the SE 401(k) account before year-end, but you can make the deductible contributions by your tax filing deadline, including valid extensions.
SEP IRA or SIMPLE IRA plan
If you’re self-employed, a business owner or sole proprietor, you can establish and contribute to either of these retirement plans. For a SEP IRA, as the employer you must contribute a uniform percentage of pay for each employee, who can’t make their own contributions. The allowed contribution amount is up to 20 percent of your self-employed income (or 25 percent of an employee’s compensation), up to $54,000.
An alternative is the SIMPLE IRA. It allows employees to contribute a percentage of their pay to an IRA and requires an employer to either match employee contributions (dollar-for-dollar) up to 3 percent of compensation or make a fixed contribution of 2 percent for all eligible employees, even if they choose not to contribute.
A SIMPLE IRA plan is allowed for employers with 100 or fewer employees. The limit for employee contributions is $12,500 for 2017. The catch-up contribution for those over age 50 is $3,000.
Contributions to these accounts can be made by the employer’s tax filing deadline, including valid extensions, for the employer to be able to deduct contributions for the 2017 tax year.
A Long-Term Perspective on the
Stock Market Downturn
Prior to Feb. 2, the stock market had been through a remarkably tranquil period. Since that date, the U.S. stock market has experienced multiple days with drops of 2 percent or more in a short period of time. Here, though, we will focus on the long-term investing concepts you should keep in mind, as well as historical context for market moves of this magnitude.
Markets are notoriously difficult to forecast over any horizon, and this difficulty is only amplified over shorter periods of time. Nevertheless, this won’t stop some market “professionals” from trying. You would be wise to ignore these forecasts in your own decision-making. Yes, markets are currently extremely volatile, but that volatility might not continue and no one can reliably know whether stocks will move up or down from here. In fact, no one can even clearly know what caused the drop over the last week. Some commentary we have seen points to inflationary concerns while other pundits blame anxiety around the U.S. budgetary process. Still others believe the market is concerned the Federal Reserve may raise interest rates too quickly. Who’s to say which, if any, of those explanations are correct, much less what that implies going forward. What we do know, though, is that over the long term, you can expect to be rewarded for investing in a low-cost, diversified portfolio of stock funds.
The recent past shows us just how wrong consensus, short-term forecasts can be. Two recent examples are the post-financial-crisis prediction of higher interest rates and the expectation that the stock market would decline following the 2016 presidential election. Both predictions were clearly wrong, and investors who acted on them instead of focusing on the long-run evidence that markets tend to reward risk-taking were harmed.
Your Plan Incorporates Risk
One of the advantages investors have today compared to investors in the early part of the 20th century is that we now have decades-worth of data to help us understand long-run returns and risks. Our partner, BAM Advisor Services, maintains an extensive database of the risk profiles associated with the portfolios that we recommend to clients. This data allows us to incorporate risk into the way we build your financial plan, meaning that outcomes like the market falling by 2, 3 or 4 percent over a handful of days already are reflected in our recommendation. The BAM Advisor Services Investment Policy Committee is well aware that these events — however unpredictable — will eventually happen, and we therefore imbed this knowledge in the comprehensive planning process that results in your portfolio allocation.
Putting Market Risk in Historical Context
The following graph plots the historical annual return of the U.S. stock market in each year (in blue) from 1926 through 2017 and the largest intra-year decline (in light blue outline) that occurred in each of those years.
Annual Stock Market Returns and Intra-Year Declines
There are two primary takeaways from this graph. First, as we all know, the stock market goes up far more often than it goes down. Second, but possibly less well known, virtually every year includes a period of time where markets fell precipitously. It’s clear, though, that these intra-year declines don’t necessarily signal whether the market will be up or down over that particular year. But it does show that stock markets have and always will be risky, particularly over shorter periods of time.
Are There Any Actions to Take?
Given what we know, we obviously don’t recommend making drastic changes to your portfolio allocation as a result of short-term market moves already accounted for in the planning process. Your portfolio is well-thought-through and built to be highly diversified. But are there any other actions worth considering? If you haven’t recently, now could be a good time to reassess your investment plan from a long-term point of view. We’re always here to help with that endeavor.
Re-posted from marketwatch.com
The $1.2 trillion tax overhaul that was signed into law by President Trump on Friday will affect your retirement in a number of ways.
The tax plan no longer includes lowering contribution limits on retirement accounts or nixing traditional individual retirement accounts in lieu of Roth individual retirement accounts (which would have shifted when retirement savers pay taxes on their savings), but it does address individual retirement accounts and increases the standard deduction (by almost double), which could affect the way people itemize their charitable donations. These changes would be for next year’s taxes, to be filed in 2019 — 2017 tax returns are due on April 17.
Here are five ways retirees will be affected:
Retirees will have to be more strategic about their IRA conversions
The new tax bill would stop what’s called “recharacterizations” of IRAs. Recharacterizations allow a person to undo their decision to rollover or convert accounts to Roth IRAs. Therefore, retirement savers who have already made these conversions this year should consider before the new year if they want to reverse them.
And contribute to charity twice every two years
Retirees likely won’t be itemizing since they don’t have many deductions, except for charitable contributions, property taxes and perhaps state income taxes, said Andrew Houte, director of retirement planning at Next Level Planning and Wealth Management in Brookfield, Wis. Some retirees may want to take advantage of Qualified Charitable Distributions, which allow them to donate directly to charity from their individual retirement accounts without having to itemize those donations (after 70 ½ years old). Because of the increase in the standard deduction, retirees may benefit from making more charitable donations, but less frequently — for example, donate twice as much, but every other year — which would help taxpayers by having more to write off than the standard deduction limit, said Scott Bishop, executive vice president of financial planning at advisory firm STA Wealth in Houston, Texas. More people may also invest in donor-advised funds instead of donating cash, he said.
Personal income tax rates are changing, but still important
Personal income taxes would be lowered for most households — to 10%, 12%, 22%, 24%, 32%, 35% and 37%. Retirees will have to watch their income to avoid ending up in a higher tax bracket, Bishop said. Income includes withdrawals from retirement accounts, required minimum distributions and ordinary income. For example, people with large balances might want to begin distributions before turning 70 ½ years old, when they’ll be required to take distributions in some accounts — that way, when they get there, they won’t be forced into a higher tax bracket. It takes a little calculating, and predicting what income will look like in the future versus now, but it could save retirees money down the road.
Also see: The four worst things about the tax bill
Small businesses may not offer retirement accounts
Most 401(k) plans and similar defined contribution benefits are offered by large employers because they’re too expensive for small businesses to administer. Under tax reform, it may become even less advantageous for small businesses to host these accounts, said Trevor Gerszt, chief executive officer of CoinIRA, a company that allows savers to convert assets into digital currency, such as bitcoin. The bill reduces the income tax rate for small businesses but does not address offering or contributing to retirement plans, which are incentives to establish these accounts, according to the American Retirement Association.
Some retirees may want to move
Deductions for mortgage interest rates were left untouched, and $10,000 in local property taxes will be deductible on a federal level. That means income tax-free states will be best for retirees, according to Brett Anderson, a financial adviser and president of St. Croix Advisors in Hudson, Wis. Retirees are more easily able to move from state to state because they have no job tying them down, he said, which also means they can be more sensitive to the various income tax rates in various states. There are a few states that soar above the rest for tax-friendly states best for retirees, such as Nevada, New Mexico and Wyoming.
The new bill also reduces the maximum amount of mortgage debt a person can acquire for their first or second residence, to $750,000 for married couples filing joint tax returns (or $375,000) for those married filing separately, down from $1 million. This won’t affect home purchases before Dec. 16, 2017 so long as the home closed before April 1, 2018.
Re-posted from Investopedia
We all know that being able to save is very important when trying to grow assets. To eventually find financial freedom and have our assets give us the income that we need to live, we need to be able to live on a smaller amount of money than what we are bringing home. However, there are a lot of forces working against us trying to make us spend more. Marketers are getting smarter and more effective in getting us to overspend.
It is true that getting what you need for a smaller price is a good thing, however more people are falling into the trap marketers plant to make us buy more. To become financially successful, you need to understand the difference between buying on sale and being frugal.
Be Aware of Marketers Techniques Use to Make You Buy More
Marketers study human behavior. They know about the mood they need to put you in so that you buy more. They use color, scents, sounds and textures to convince you that you need their products.
Pricing is also an important tool they use. For example, recent research found that coupons actually have neurological effects on customers. They impact happiness and lower stress. Marketers understand that people want a good deal and offering coupons might be a way to get customers to feel good about purchasing their products.
As a financially savvy consumer, you need to be aware of the techniques marketers use so that you can be ready to resist to the temptation. (For related reading, see: Sneaky Strategies That Fuel Overspending.)
Focus on What You Want Versus What You Need
To be smarter with your money, you need to determine the difference between what you want and what you need. Needs are everything you have to have to be able to go on with your day. Besides food, water, shelter and clothing, there isn’t much more we substantially need. Depending on your career choice or goals you are aiming for, there might be other things you need to accomplish them.
The rest of the stuff we buy are wants! To become financially successful, you need to control yourself when dealing with your wants. You need a priority list to help you stay within your budget. This will ensure you have some money to invest for later.
What Is Frugality?
Frugality is not about depriving yourself. It’s not about living a substandard life. It is actually about avoiding waste. To stop you from spending money on stuff you don’t really need, you have to find out what is important to you. There are too many things we buy every day that we end up throwing away. The few dollars you could save can make a huge difference over the long term. Would it be worth it to be frugal with your money if it meant you afford something really important to you later?
Take a hard look at all of the money that you waste on small things and make a plan to control your “want” expenses. If you still decide to purchase a certain want and are able to to buy it on sale, more power to you. It’s time for you to take control over your money. Don’t let marketers dictate how to spend it.
(For more from this author, see: How to Build Your Financial Foundation.)
IMPORTANT DISCLOSURES: MoneyCoach LLC and/or Patrick Traverse offer investment advisory and financial planning services through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe), an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe Asset Management offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Belpointe Insurance, LLC and Belpointe Specialty Insurance, LLC. MoneyCoach LLC is not affiliated with Belpointe Asset Management, LLC.
Re-posted from MSN Money
Being able to contribute consistently enough to your retirement savings accounts is the most important aspect of any retirement plan, but it’s also by far the most challenging. So finding a way to make regular, adequate contributions easier is really the key to a successful retirement. And the best way to accomplish this is by having a written financial plan.
Why does a written plan help?
Self-help gurus uniformly urge their clients to write down their goals, plans, and dreams for a reason. Writing something down has a significant psychological impact on the writer: It makes that written declaration more “real” to us and gives us accountability. Once it’s in writing, we feel more compelled to follow through on it. For a task like saving for retirement, that feeling of accountability can make all the difference in sticking to a contribution plan versus having a plan but only contributing “when it’s convenient.” A written plan also motivates us by reminding us what we stand to gain tomorrow by sacrificing today.
The power of written financial plans
A recent study by Charles Schwab highlighted the impact that written financial plans have on retirement savings. The study compared various financial attributes of Americans with a written financial plan to those who did not have one. For many important financial tasks, the difference between the two groups was startlingly high.
For example, 27% of savers with written financial plans maxed out their contributions to their retirement savings accounts, compared to 11% of savers without plans. Thirty-four percent of savers with written financial plans had investments in addition to their retirement investments, versus only 16% of those without written plans. And 49% of savers with written financial plans felt very confident in their ability to reach their financial goals, as opposed to just 13% of those without written plans.
Starting your financial plan
Financial plans come in many forms — debt payment plans, down payment savings plans, investing plans, and so on. And while the idea of creating a financial plan may sound daunting, in reality such a plan can be extremely simple, as you’ll see shortly. We’ll focus on a retirement savings plan, but the principles are similar for creating any type of financial plan.
First, your plan needs a goal. For a retirement savings plan, the goal will typically be to save enough during your working years so that when you reach your planned retirement date, you will have enough money to live comfortably for the rest of your life. Because different savers have very different ideas of what “living comfortably” entails during retirement, the exact number you end up with as a savings goal will depend largely on your own preferences and situation.
In order to know how much money you’ll need to save for retirement, you first need to figure out how much you’ll be spending during that time. Ideally, you’ll write up a list of the expenses that you expect to carry during retirement and add them up. If that sounds like too much work, you can get a pretty fair estimate based on your current income.
If you anticipate a fairly sedate retirement without a lot of fancy, expensive activities, you can assume for planning purposes that 80% to 90% of your current income will suffice as annual income during retirement. Aim for the low end of this range if you’re sure you’ll be debt free by the time you retire (that includes owning a home that’s completely paid off). Otherwise, aim for at least 90% of your current income. On the other hand, if you dream of an adventurous retirement touring the capitals of the world, aim for at least 100% of your current income (or possibly even more, if you have really expensive plans).
Making it official
Once you have a goal for your retirement income, you can plug that number into a retirement calculator to find out how much you need to save in order to hit your target by your planned retirement date. Let’s say that your goal is to save $1 million by age 65 and the retirement calculator tells you that in order to reach your goal, you need to save $1,000 per month. Write this down in a form that will inspire you to follow through. For example, you might write “Millionaire by age 65: $1,000 every month into the 401(k).” Then post a copy of this document somewhere you’ll see it on a regular basis, such as next to your bathroom mirror, on the front of the refrigerator, or attached to the side of your computermonitor.
Just having the plan in writing, staring you in the face on a regular basis, can work wonders to improve your follow-through.
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Re-posted from AICPA.ORG
6 Money-Saving Tips You Can’t Afford to Miss
Posted by Susan C. Allen, CPA, CITP, CGMA on Jun 21, 2017
Those fun, light-hearted GEICO commercials that ask if you are tired of paying too much for car insurance hone in on the idea of wasting your money –– paying too much for something or not getting enough.
As a CPA who is passionate about making my hard-earned money work for me, it’s important to take time to critically analyze what my cash is doing. Busy lives often lend themselves to costly complacency in one’s personal finances. Basically, we want bill paying done and our retirement planning intact with as minimal effort as possible.
At least once per year, I do a serious deep-cleaning scrub on my family’s finances. I look at what we’re paying and why, and I see where we need to do better. This “scrub” saves us thousands of dollars and I suggest each of you take a few hours each year to review your finances critically. Don’t let your money run itself; it needs you to keep it on track.
Here are six tips to make your money work for you (consider sharing these with your clients):
- Carefully review your credit/debit card auto-drafts.
Did you join Consumer Reports to get insight on what car to buy and forget to cancel it after your purchase? Or sign up for other subscription services that you haven’t used in months? Review your statements for these $10-20 no-value bills. Though small, they add up quickly.
On the flip side, auto-draft anything you can to your credit card. You’ll consolidate bill paying, and get paid to pay your bills. Often, electricity, water, cable, etc., can be auto-drafted. One can easily earn hundreds of dollars each year (in points and rewards) by effectively using a credit card. But, don’t forget to pay off the balance each month! Interest on credit cards is extremely costly. I suggest setting up another auto-draft to pay your credit card bill directly from your bank account.
- Bundle your insurance (home, automobiles, etc.), and scrutinize rate increases.
These bills can significantly fluctuate each year as your insurance carrier offers new incentives or changes its rates (sometimes arbitrarily). This year, I noticed our home and auto insurance went up by about $1,500. After calling my agent, I learned that there was an explanation for some of it (insurance regulation hiked up the price), but there was no excuse for the bulk of it. After asking my agent to price shop, I decreased my bill and increased my coverage. My agent wasn’t going to do this price shopping without my nagging, but a five-minute phone call saved me over a thousand dollars.
- Review your investments.
Make sure you are deferring appropriately to your 401(k), taking advantage of company matches and profit sharing plans. Also, ensure you’re planning for retirement with other investment vehicles (IRAs, etc.). Review your portfolio, making sure it’s well-balanced. Consider contacting your 401(k) or brokerage adviser to confirm your investments (as a whole) keep your plans on track. Consider making serious adjustments the older you get; the closer you are to retirement, the less risk you may want to take.
- Know the market rates for cell phone plans, cable, internet, etc., and don’t be afraid to negotiate.
Cell phone rates have actually gone down recently as more competition enters the market. If you bundle plans with family members, you may be able to save even more. Plus, many employers offer their employees discounts for certain carriers.
Cable/internet, for example, is a bill that I need to renegotiate each year. Otherwise, they go up significantly. Call your cable/internet company and ask about promotions, and let them know you’re not happy that your bill went up. Talk to someone in their customer retention group. They usually have more flexibility to keep your rates lower (or offer you freebies like premium channels) to keep you from switching to a competitor. If it doesn’t go well the first call (and you have time and patience), call back. A different representative may give you a better deal.
- Review your debt financing and interest rates.
Prioritize what to pay off quickest based on which item has the highest interest rate. Explore where you may be able to decrease interest rates by re-financing or consolidating debt. Make an extra payment that goes directly to principal. You can save significant money by paying off your debt sooner.
- Know what you’re worth (net equity).
Annually, prepare a financial statement. Add up your assets (cash, investments, property, etc.) and subtract your liabilities (loans, etc.) to yield your net worth. Are you too heavily in debt, or saving enough for retirement? These are important questions to know your true financial health.
I use Mint.com (a free application) to track our family’s progress, but a simple spreadsheet or other system works. The point is: don’t let your finances be a surprise to you.
The AICPA is committed to helping us achieve financial security. Visit feedthepig.org for additional tips and resources to help you budget, invest and reduce debt.
Susan C. Allen, CPA, CITP, CGMA, Senior Manager, Tax Practice and Ethics-Public Accounting, Association of Certified Professional Accountants