Five Steps to Organizing Your Finances

Do you know your net worth? Or how much you spend each month, and on what? Or how much you can expect from your pension plan or Social Security in retirement?

A no to most of these questions puts you with the majority of the population who have been too busy with life to get a handle on their finances.

Fortunately, there’s a five-step action plan to help you take control of your money.

1. Set up a financial filing system. Create a personalized filing system by labeling accordion file pockets with broad financial categories. Then label regular file folders with subcategories that fit your situation and file them into the accordion pockets. For example, create a Property & Casualty Insurance accordion file and fill it with a Vehicle Insurance regular file folder.

2. Gather records. Look through your records to identify missing information. For example, you need an estimate of your Social Security retirement benefits. To request one, contact the Social Security Administration at 800-772-1213. Gather copies of your health, disability, life, homeowners, and vehicle insurance policies, and get a copy of your credit report. Contact the three national credit bureaus for information about how to request a copy of your credit report and how to correct any errors you find (Experian 888-397-3742, Equifax 800-685-1111, Trans Union 877-322-8228).

3. Size up your situation. Add the estimated current value of all assets, including your home, car, personal property, savings, investments, and retirement accounts.

Next, add all liabilities, including mortgage, credit card balances, and any other outstanding debt. Then subtract liabilities from assets to figure net worth.

Then, make a list of income and expenses by reviewing paycheck stubs, checkbook register, and credit card statements from the past year. Finally, track spending for a month by saving all receipts or recording cash purchases in a notebook. A spending plan form or money management software program helps organize spending by category.

4. Chart a course. Set financial goals–long-term and short-term–and figure how much money you’ll need for each. Create a target saving and spending plan that meets needs using your list of income expenses. For a month or more, track actual spending to see how you’re doing, making changes as necessary

5. Brush up on money management basics. Contact or visit Hopewell Federal Credit Union for more information about how to save and spend finances wisely.

Advertisements

Make SMART New Year’s Resolutions

Everyone–regardless of age–can take steps to shape up their finances.

As you decide on your New Year’s resolutions, think SMART–financial goals that are specific, measurable, adjustable, realistic, and time-oriented.
Here are some examples of financial goals for different generations:

Youth
* Collect your change. Each time you buy something, save the change you get back. Deposit the change in a container at the end of every day. Over time it could add up to a significant amount of money.

* Save your allowance. Whether you want to buy something you’ve been eyeing for months or you want to start saving for college, the only way you are going to do it is by putting your allowance away. Deposit at least part of your allowance in a share savings account at the credit union.

Gen Y
* Open a Roth IRA (individual retirement account) and start saving. Make savings a habit and invest at least 10% of every paycheck for retirement. The longer you have to save with a Roth IRA, the more you save on taxes. Although contributions aren’t tax-deductible, your money grows tax-free and comes out tax-free as long as you meet certain requirements.

* Put your credit card away. Use credit cards only when you know you have the funds set aside to pay the bill in full when the bill comes. Don’t leave a balance on your credit card or you’ll be charged interest.

Baby boomers
* Put your debts in priority order. Make a list of all your liabilities and organize them by the annual interest rate. Pay off those with the highest rates first, while still making at least minimum payments on all the others. Set a specific, realistic date for when you plan to achieve your goal of paying off all debts.

* Determine your net worth. Calculate your assets minus liabilities each year–preferably on Dec. 31–so you quickly can see whether you’re gaining ground or falling behind. Your net worth should be increasing each year. If it’s not, make a plan to improve it, such as pay down a specific debt or put more money into a retirement account.

Seniors
* Evaluate your estate plan. Establish or review your will, advance directives, and powers of attorney, and make sure they reflect your preferences and current situation. Make sure all of your intended beneficiaries are on file for all your financial accounts.

* Check all insurance policies. For example, know what is covered in your homeowners policy and verify your liability coverage. Call your insurance agent if you have any questions.

How to keep your New Year’s financial resolutions

ByJill Schlesinger /MoneyWatch/ December 28, 2012, 6:55 AM

(MoneyWatch) When you think about it, New Year’s financial resolutions may be easier to keep than losing weight or quitting that smoking habit. According to a study by Fidelity Investments, 62 percent of consumers say they stuck with their financial resolutions in the past year, compared with only 40 percent who kept their other resolutions.

View the entire cbs.com article.