7 steps to get your financial house in order

The annual fresh start of a new year is the perfect time to get your financial house in order. To help you on your way, the American Institute of CPAs’ National CPA Financial Literacy Commission encourages you to start with these 7 steps:

1. Get your budget in shape – A budget that maps out your expected income, fixed expenses like rent or mortgage and car payments, what you plan to set aside for savings, and what’s available for everything else you may want can help you stay on track toward your financial goals. If you don’t already have a budget, the new year milestone is a great time to start. If you’re already using a budget to help manage your finances, an annual tune-up can help you make sure it’s still current.

2. Leverage technology to automate savings – Whether it is an app or a desktop program, there are many programs and technological tools (many of which are free) that can help you automate your savings and spending plans. Automating these processes means you don’t have to remember it every time, and that by itself can increase your chances of success.

3. Plan out your goals and get a budget buddy – Simply saying you want to save more money may be enough to get you started, but taking the time to differentiate your short, medium, and long-term will help keep you focused and on track through the inevitable bumps in the road. Thinking of your budgeting process as a long-term exercise program makes sense – improving your finances is a long-term commitment. Partnering with someone else on the same journey as you will only make this process easier and you can motivate and support each other along the way. No plan in place? No worries! The AICPA has free resources to help you make a plan today!

4. Review your investment mix – Are your investments still in line with your goals and risk tolerances? Changes in the values of your stocks, bonds, and other holdings over the past year may have moved the relative weights away from what best meets your needs – for example, if the stock market had a good year, the percentage of your investments in stocks may have drifted upward from what you see as the right proportion of stock market risk. The kickoff of the new year is a good time to review your mix. A qualified CPA financial planner can help you determine if it’s time for rebalancing.

5. Review all insurance coverage – Take a look at your coverages for auto, home, liability, etc. to be sure you have enough coverage (not too much!) and that you’re not overpaying. Look at whether you could drop some deductibles to save on premiums or if you have some unnecessary “extra” features in your policy that are adding up. Comparison shop among insurance companies to see whether switching makes sense. Even if you’ve done this before, it pays to compare periodically as different companies adjust pricing frequently to meet competition or get more competitive at times in certain markets.

6. Review your retirement plan contributions – Check to make sure you are contributing to your work 401-k plan at a level that gets you the maximum employer match, otherwise, you are leaving money on the table. Similarly, it might make sense to increase your IRA contributions if you are not reaching the limit for the year in order to take full advantage of this year’s opportunity to put away retirement savings dollars for tax-deferred growth.

7. Review your beneficiaries – Especially if you’ve had a recent family event such as a marriage, birth or adoption of a child, new grandchildren, or a divorce, the approach of the new year is a good opportunity to make sure the beneficiaries you’ve designated in your life insurance, will, bank accounts, and IRA’s are aligned with your current situation and wishes.