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Organize Your Finances for the New Year

Jan. 28, 2014
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Many of us make resolutions for our finances, but find ourselves soon after not keeping them.

This year to increase your chance for success, go beyond making a promise about keeping better track of your finances or going on fewer shopping binges. Put your goals to action by taking your promise and breaking it down into an actionable financial checklist. Keep that checklist in a prominent place – maybe on the refrigerator door, at your desk, or in the car. Make it ambitious, but achievable.

Here are some suggestions for what to put on your New Year’s financial checklist.

Organize Your Finances

Many people have no idea how much money is in their checking account, or what their investments are earning, or how many months of income they have squirreled away for an emergency.

Use either an Excel spreadsheet or an online program, like Mint, to view all your accounts together. Keep tabs on how much you’re spending on necessities (your home, food, gas and other non-negotiable bills); discretionary spending (clothes, entertainment, and vacations); and how much you have saved for your big-ticket item wish list, emergencies, and long term goals like retirement.

Pay Down High-Interest Debt

It’s nice to see a zero balance on your credit card. But sometimes that’s not possible, and you shouldn’t obsess over it to the exclusion of every other financial priority.

Instead, pare back the accounts with the highest interest rates. These will tend to compound faster, and get out of control sooner, than accounts with more moderate interest rates. Set your sights on getting your budget to a point where you can pay a steady fixed rate on your credit cards each month – more than the minimum required amount. Once you do so, you’ll be able to calculate how long it’ll take you to pay off your balance in full.

Retirement Savings: Step Up Your Game

Retirement is the priority that far too many Americans ignore from year to year. Experts estimate that we have a $6 trillion gap between how much U.S. households should be saving for retirement and how much they are actually saving. Let 2014 be the year you break out from the pack and take control of your financial future.

How much should you save for retirement? Some experts recommend saving enough money to replace 70 to 85 percent of your pre-retirement income. In other words, if you earn $100,000, you should save enough money that you’re on-track to live on $70,000 – $85,000 per year during retirement.

Use online tools, like Jemstep’s Portfolio Manager, to see how much money you’re currently on-track to have during retirement and for unbiased recommendations on how to invest the money you have saved.

These days, you’re in charge of your own financial destiny. The majority of people won’t enjoy guaranteed pension checks during retirement. Make 2014 the year that you take concrete steps to make strong choices for your financial future.

Reduce Costs

One great way to increase your retirement nest egg is to reduce fees and expenses.  You don’t want to pay more than you have to and paying less keeps more money in your portfolio, so make a commitment to comparison shop for quality, but less costly funds.  To show the impact fees can have, let’s say you have 25years to retirement, $100,000 in your 401k, and expect a 7% annual return.   With all things being equal except the fees, you will end up with over $120,000 more if you invested in a fund with a 0.70% fee than if you invested in a fund with a 2.00% fee.  Use this online fee calculator to determine the impact of fees charged by your 401k funds versus outside funds.

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Ekaterina Pokrovsky /