Tag Archives: finances

Create a Financial Calendar for the New Year

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By Nathaniel Sillin

When was the last time you made a financial resolution on New Year’s Eve? If you can’t remember, you’re in good company.

The Allianz Life Insurance Company of North America’s annual New Year’s resolutions survey for 2014 reported that 49 percent of respondents said that health and wellness were their first priorities for the coming year, up from 43 percent in 2013. Only 30 percent ranked financial stability as their top goal for the year.

new-years-resolutions1

In 2016, maybe it’s time to push financial fitness to the top of your list by creating an annual financial calendar that helps you save, spend and invest a little smarter. Here are some suggestions to build your calendar:

Set three important money goals for the year. Three money goals may not sound like a lot, but if you’ve never thought about money goals before, establishing these targets can make a major difference in your financial life. Set goals that address key money concerns or serve as a springboard for a solid financial future. Choose what makes sense for you, but here are three basic goals to start with:

Create or reset your budget. If you’ve never made a budget before, spend a month or two tracking everything you spend. Review your findings closely and see whether you’re spending less than you earn. If not, determine if you can cut spending to direct more funds to meet key goals. If you already have a budget, consider reevaluating your finances to see where you could cut costs.

Build an emergency fund. An emergency fund (http://www.practicalmoneyskills.com/emergencyfund) contains between three to six months of living expenses you can draw upon only in a real financial emergency such as unemployment, illness or a major unplanned expense.

Save for something special. Make one of your three goals a fun goal – a vacation, a new bike, a wardrobe upgrade – something that feels like a reward.

Here are calendar items that might help you reach those goals.

Make sure you note staggered receipt dates for each of your three free credit reports from Experian, TransUnion and Equifax so you can keep a steady eye on your credit and spot irregularities if they happen.

Prevent severe money surprises by marking key repair or replacement dates on home, appliance and other personal expenses that might be coming up in the future. Use the time you have now to schedule inspections and estimates for each so you’ll be able to start setting aside funds in advance.

Retirement readiness is another key calendar item. At least once a year, consider reviewing your holdings in retirement or investment accounts to make sure they’re still performing as you’ve planned or if not, whether you need to restructure the investments in your portfolio.

Put the open enrollment dates for employer- or self-employment benefits on your calendar and then mark a date several weeks before to allow you to start thinking through necessary changes. The way you choose employer or self-employment benefits is a key part of your financial planning and should intersect with other independent money decisions you’re making for yourself and your family.

Insurance renewal dates are important to mark as well. If you’re not comparison-shopping for the auto, homeowners or health insurance coverage you buy on your own, there’s a good possibility you’re losing out on money, service or coverage.

Set two dates each year to review your overall finances. You might consider dates in June and November to see how you’re doing with budget, savings, spending, investment and tax issues. The June date is for corrective actions; the November date is to determine the last-minute spending, savings or tax moves you want to make before December 31 and to set financial goals for the New Year. If you work with a qualified financial or tax expert, consider involving him or her in the conversation.

Bottom line: If you use a calendar or datebook to keep on schedule, add important money dates and activities so you can meet your lifetime financial goals.

 

Money Matters: 10 Open Enrollment Mistakes to Avoid

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By Nathaniel Sillin

How much time do you spend reviewing your benefits before open enrollment each year?

If your answer is “not much,” you’re not alone. A recent survey by insurer Aflac says that 90 percent of Americans choose the same benefits year after year and that 42 percent forego up to $750 annually by making poor choices.

Rushing through annual benefits updates or making such uninformed decisions in insurance, retirement or other workplace-based benefits are actually part of a bigger story. Open enrollment is just one part of an overall financial plan: Unfortunately, too many employees see it as the only financial planning they have to do all year.

In reality, a safe financial future depends mostly on the savings, investing and spending decisions you make outside the workplace. As many employers are looking to shrink or discontinue the retirement and health benefits they offer, it’s time to take a fresh look at open enrollment.

Here are 10 benefits mistakes you might want to avoid:

  1. Not having an overall financial plan. Your company may offer excellent benefits now. However, a 2013 study published by the Bureau of Labor Statistics reports that average worker tenure at U.S. companies is only 4.6 years. So the biggest open enrollment mistake might be assuming your current benefits assure your financial future. It’s important to work alone or with qualified advisors to determine the right work-based benefits as part of overall spending, savings and investment activities throughout your lifetime.
  2. Making choices at the last minute. Your benefits are important and deserve time for consideration. Put your open enrollment dates on your personal calendar with a reminder a few weeks ahead of time to coordinate with qualified advisors if you have them.
  3. Forgetting to coordinate with your spouse or partner. Many employers are planning big changes to spouse/partner benefits. While the Patient Protection and Affordable Care Act (ACA) lets parents keep children on their health plans until they turn 26, more employers are instituting “spousal surcharges” or excluding spousal coverage altogether if they already have access to employer health insurance.
  4. Ignoring your state’s Health Insurance Marketplace. Even if you have employer health insurance, things change. If you lose a job or cannot stay on your spouse or partner’s health plan, it might be worthwhile to familiarize yourself with your state’s ACA-mandated health insurance marketplace ahead of time.
  5. Underestimating how big life events might affect your benefits. Salary changes, marriage, divorce, serious illness or starting a family are big signals to check your benefits, preferably well in advance of open enrollment. Think through every potential situation you might face and ask questions about how those changes might affect your benefit selections.
  6. Passing on flexible spending accounts (FSAs) and health savings accounts (HSAs). FSAs are workplace-based accounts that allow you to set aside money on a pre-tax basis to help you pay for healthcare and dependent care expenses during the calendar year. HSAs, if you qualify, also allow you to set aside pre-tax dollars in a qualified investment or savings account for long-and-short term medical expenses not covered by insurance. They don’t require you to spend out those funds every year. Your workplace benefits counselor, qualified financial advisor and Internal Revenue Service Publication 969 can assist with eligibility, types of accounts, contribution limits and tax issues associated with these choices.
  7. Leaving retirement selections unchanged. As the Aflac data indicates, many individuals don’t change their investment focus in self-directed retirement plans for years. That’s why reviewing options in advance is essential.
  8. Overlooking wellness options. Many employers pay for exercise, cholesterol screenings, weight loss, smoking cessation, immunizations or related benefits that can make you healthier, save money and possibly lower health premiums.
  9. Bypassing transportation breaks. If you drive or take public or company-sponsored transportation to and from work, you may qualify for specific discounts or tax deductions. IRS Publication 15-B covers these programs and how to use them most effectively.
  10. Forgetting education benefits. If an employer is willing to train you to advance in your career, don’t pass it up. However, get advice on the possibility of tax liability for these benefits. Separately, check out employer-sponsored education grant or scholarship awards for you or your kids—that can be free money.

Bottom line: Open enrollment is just one piece of a well-organized financial puzzle. Make sure your employer provided benefits choices compliment savings, investing and spending decisions you’re making on your own.

Nathaniel Sillin directs Visa’s financial education programs.
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Money Matters: 10 Reasons Why You Might Be Financially Stressed

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By Nathaniel Sillin

Stress can come from everywhere—career, school, family, relationships, health—and especially money.

The American Psychological Association (APA) recently reported that money remains the number one stressor for 72 percent of Americans. In fact,money has led the APA’s annual stress survey since its debut in 2007, the year before the financial crash that took the U.S. economy into its worst slump since the Great Depression.

Are you financially stressed? Here are 10 major signs of financial stress and ways to take action.

  1. You wonder if your job is secure. Even though the economy has improved in recent years, employers still cut and reassign workers and make occasional adjustments in pay and benefits. If you’ve spotted changes in other departments or news accounts suggest a shift in your industry, start thinking ahead. Action plan: Build up your emergency fund to cover six months or more of basic living expenses, update your resume and get organized for a potential job search.
  2. There’s no money to save or invest. If meeting basic expenses is a struggle and you have no savings or investments at all, it’s time for a serious review of where your money is going. Action plan: Making a basic budget is the first step to tracking every penny spent. Figure out extras you can cut and set more aside for savings and debt payoff.
  3. You have disagreements with a spouse or partner about money. A 2013 University of Kansas study noted that arguments about money are the top predictor of divorce. Action plan: Share information about all debt and legal issues and exchange respective credit reports and credit score data as you plan to solve all money problems together.
  4. You are paying bills late. Late payments can hurt your credit score. Action plan: Set up a physical or digital calendar to keep track of payment dates and budget in order to put more money toward debt and eventually savings
  5. You imagine a windfall. Waiting for a bonus, an inheritance or even a winning lotto ticket to ease your financial stress indicates you have a tendency toward financial denial. Action plan: If your current efforts at budgeting, saving money or paying off debt aren’t working, consider a reality check with a qualified financial advisor.
  6. You use your home equity like a cash register. Home equity loans or lines of credit can provide an interest-deductible solution for a variety of important needs, but a down housing market can wipe out your equity. Action plan: Either refinance if you qualify or stop using the line entirely until you can pay down the balance.
  7. You’re considering drawing from retirement funds to solve money problems. Think twice before taking out loans against these funds. Interrupting your retirement planning, particularly over the age of 50, can have significant financial consequences. Action plan: Re-budget your finances and seek qualified advice to help you find another solution.
  8. Late and overdraft fees are piling up. According to the Pew Charitable Trusts, the average bank overdraft fee is $35; credit card late fees are similar. Action plan: Schedule bill payments and opt for online billing when possible to save time on mailing. If you have to pay additional late fees, ask your bank or credit card company if it might forgive the fee; many will remove one fee a year.
  9. You’re late on student loan payments. It is difficult to have student loans forgiven, cancelled or discharged (eliminated) in bankruptcy if you can’t pay. Paying late can also hurt your credit score. Action Plan: Seek qualified financial advice that specifically addresses the type of student debt you have and resolve to pay bills on time.
  10. Your accounts are disorganized. It’s difficult to reach important financial goals when you really can’t track your finances. Action plan: Get some advice from a trusted friend or a qualified financial professional about how to best organize your accounts and whether online account management may be right for you.

Bottom line: Reducing your financial stress is a healthy decision. Review your money habits and get qualified help if necessary to lessen this burden.