Another new year is right around the corner. It’s the time of year that many people begin thinking about habits they want to change and goals they want to reach. Year after year, finances top the family list of resolutions. There’s no better time then the start a new year to focus on a few areas of the family’s financial life. Freedom Debt Relief has few tips for families to start their finances off on the right foot in the new year.
Create a family budget.
The beginning of the year is the perfect time to review the family’s budget. Going into the next 12 months, the family should have a good picture of how much money is coming in and going out. Creating a budget allows the family to decide how they can spend on other priorities – saving, paying off debt, and extracurricular activities for the children. Freedom Debt Relief suggests creating a budget to get your spending right in front of your face so you spot areas where you need to cut back.
Reduce debt costs.
Debt can costs families hundreds or even thousands of dollars each year, not in payments, but also in interest. There’s no upside to paying interest on consumers debt, e.g. credit card debt and auto loans. Unlike the interest paid on mortgage and student loan debt, the interest payments on consumer debt is not tax deductible. Not only that, the more money spent on interest, the less money the family is able to spend on other priorities. Freedom Debt Relief suggests families lower debt costs by negotiating lower interest rates, taking advantage of promotional interest rates, or by consolidating debt with a lower interest rate loan.
Increase retirement contributions.
As the maximum retirement contribution limits increase, so should your contributions. It’s especially essential to increase your retirement contributions if you’ve seen a salary increase. While the contribution amount may not seem like much on a small scale, it will make a big difference in the long run. To make the changes to your contribution amount, contact your human resources department. Some companies also allow employees to make changes over the internet at the plan provider’s website.
Analyze risk tolerance and asset allocation.
Even if your investment portfolio performed well last year, you should revisit to make sure your assets allocation continues to line up with your investment goals. As markets change or your attitudes toward the market changes, you may find it necessary to switch up your portfolio. If you don’t feel comfortable going the DIY route, Freedom Debt Relief suggests contacting a financial advisor to help you make the decision.
Make sure you have adequate insurance.
Insurance is an important part of each family’s financial picture. Families should be sure that each member has health insurance. Income-earners should have adequate life insurance and short- and long-term disability insurance. Homeowners and auto insurance are two other policies families should be sure to maintain. With each type of insurance, make sure the coverage amount is adequate for the asset it covers.
The start of a new year is a good time for families to review the beneficiaries listed on various financial accounts. The review should include insurance policies, annuities, and retirement plans. Be sure that there are no old policies or accounts you’ve forgotten about that may name beneficiaries other than those who you current name.
Starting the year out right allows families to enjoy the remainder of the year knowing that the important groundwork has been set. Don’t neglect your finances the remainder of the year. Freedom Debt Relief suggests doing a periodic review of your financial life to be sure the plans still match the family’s goals.