Believe it or not, more than one-half of 2012 is over. That means it’s time for a financial checkup. Tax preparer Mike Johnson, EA ATP, owner of Money Matters (MN & ND), says a mid-year financial review is critical for families to reach their financial goals.
“Most families spend more time planning a summer vacation than they do planning their finances,” says Johnson. He, along with financial counselors at The Village Financial Resource Center, suggests that consumers review the following areas and take action where necessary:
• Are you financially organized? It was likely just a couple of months ago you gathered all your documents to prepare your 2011 taxes. Was everything in order? Did you spend way too much time searching for receipts and other documentation to put together your return? Creating a system now to organize your finances not only makes tax preparation easier, it will keep you from overlooking bills and paying late, which results in late fees being added to your balance, negative marks on your credit report, and a lowered credit score.
• Is your savings account growing? Dedicate yourself to adding a set amount to savings on a regular basis. Perhaps your savings account doesn’t exist at all. The absence of a savings account, or a poorly funded one, puts you and your family on a very slippery financial slope. The people who have the hardest time saving are often the ones who most need a safety net in case of an unplanned expense or emergency.
• Are you maximizing the potential interest on your savings? Many banks and credit unions now offer savings products with interest that is higher when compared to standard rates for savings accounts. Review Internet sites such as www.checkingfinder.com or www.bankrate.com to compare the rates and terms. You usually have to meet some minimum requirements, but the interest rate often makes jumping through these hoops very doable. Always verify that the financial institution where you deposit your money is FDIC or NCUA insured.
• Are you tracking your spending? People work hard for their money, but many spend it with abandon. Even if you feel as though you have control of your spending, you won’t know for sure until you track it for at least 30 days. Write down every cent you spend, and then put your spending into categories. At this point, you can create a budget and make conscious decisions regarding how you want to spend money moving forward. Johnson, who is a 2010 graduate of Dave Ramsey’s EntreLeadership Master Series, stresses how important a monthly budget is for families. “It is critical that couples work on their budget together, because poor management of finances is the number one reason for divorce,” says Johnson. “There is case after case where couples started to work on their finances together and it saved their marriage.”
• Have you ordered a copy of your credit report? Your credit report is basically your credit reputation. It is a reflection of who you’ve borrowed from in the past and how you’ve repaid them. It is the basis of your all-important credit score. Federal law allows consumers to receive a free credit report each year from all three of the credit bureaus (Transunion, Experian, and Equifax) simply by going to www.annualcreditreport.com. What are you waiting for?
• Have you updated your W-4? You don’t want to underpay or overpay Uncle Sam, yet last year millions of people overpaid by thousands of dollars. To determine the proper number of withholding allowances, go to www.irs.gov and type the words “withholding calculator” in the search box. It will provide you with a simple worksheet. Answer a few questions and you’ll have the correct number of allowances to withhold. You are allowed to adjust your W-4 at any time during the year. According to Johnson, adjusting your W-4 may be warranted if you have multiple employers, a loss of employment, new children, children reaching age 17 (the $1,000 child credit goes away), children attending college, small business or other income such as medical studies, or just a desire to plan your tax refund amount. Others who should consider updating their W-4’s are “folks who are entering or who are in retirement and want to make sure they have enough taxes taken out of their pensions to pay their taxes,” says Johnson.
• Are you prepared for 2012 holiday expenses? Remember the old Christmas Club or Holiday Accounts where everyone methodically deposited money throughout the year and then drew it out during December to pay cash for their purchases? That idea is one we should take out of the moth balls, dust off, and put into practice. Now is the time to establish your own personal Holiday Account. Open the account with $100 right now. Involve the entire family in finding an extra $20 per week to put into it, start making your gift list, and you’ll have a happy, less harried holiday season.
Disclaimer: The information in this article is general and is not intended to be tax or legal advice.
Source: http://VillageFamilyMag.org