August 2010 Financial Articles
Procrastination and Your Finances | TopThere is a natural tendency to procrastinate in doing stressful financial activities that you don’t enjoy. Combined with a busy, hurried lifestyle and competing demands, procrastination can create its own problems, such as stress, guilt and panic. These feelings may increase as the deadline approaches and tasks remain undone. Given the current economic environment of the last several years — high unemployment, declining home values, escalating health care costs, complex tax law changes — many consumers approach finances with a since of foreboding. Because procrastination can actually cost money, the Virginia Society of CPAs (VSCPA) offers a few tips on how to keep from procrastinating on financial issues. Schedule financial tasks Scheduling financial tasks and completing them in small chunks will help you feel a sense of accomplishment. For example, most consumers receive several types of financial mail, including bills, brokerage statements and bank reconciliations. Place all financial mail in a basket and set aside some time periodically to go through them at one time. You will develop a habit that will become part of your routine. This routine will eliminate procrastination. Also, try to save time by using online bill payment services or developing a system that works for you. Create a savings strategy You may believe that you do not have enough money to save, and therefore, you develop inertia. Also, retirement may seem like such a distant dream. However, saving a little now will help get you started, and over time you will see how the investment grows in value. Watching your money grow will motivate you to create additional savings. Divide and conquer If you have a spouse or significant other, work together at the same time and split the duties. People who make commitments and have a “buddy” in the task will not be as likely to delay. One person can pay the bills while the other files statements. At this time, you may also have the opportunity to talk and discuss financial matters which will reduce uncertainty and stress. After you have worked together, reward yourself for staying on task. Remember late fees In many instances, handling financial matters early can actually save considerable money — but it involves planning ahead. For example, try to pay January’s mortgage near the end of December to get the mortgage interest deduction on the current year tax return. Many people save on Christmas supplies, such as wrapping paper and ornaments, for next year by purchasing them immediately after Christmas. Also, irrigation companies will offer substantial discounts to install irrigation equipment during off-season times. Even some colleges give substantial discounts for getting tuition paid early. Because many businesses want smooth cash flow, it makes sense for them to offer such discounts. Of course, it is very important to weigh the discount you will be getting with any interest or investment income you might have earned by retaining the money. While savings can be the reward for paying early, late fees, penalties and interest can be the penalty for not getting financial tasks done by the due date. It is especially important to pay credit card bills on time, as just a short delay can add considerable late fees to a bill. Your local CPA can offer advice on creating a budget and making smart choices that will help reduce procrastination on financial matters. Consult your CPA with all your questions about financial issues facing your family. The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.financialfitness.org and click on “Find a CPA.” Understanding Your Credit Score | TopDo you know what’s in your credit file? The update in the Fair Credit Reporting Act that took effect in 2004 and 2005 allows all Americans the right to receive free copies of their credit files annually from credit reporting agencies. In the wake of that change, the credit reporting agencies and related companies have stepped up their efforts to market a wide range of credit-related products to consumers: credit scores, credit watch services, credit protection plans and more. If you want to manage your credit effectively, the Virginia Society of CPAs (VSCPA) suggests you go right to the source and review the data that all the credit reporting agencies use. Then you will have the opportunity to correct inaccuracies and review corrections — all at no charge. The rise of the credit score A typical credit report provides users with several pages of detailed information about an individual’s financial past. It lists bank accounts, credit cards, revolving credit accounts, loans and other financial transactions. The report has details about current payments, past history of payments on current accounts, and similar information about accounts that have been closed. In short, there is a lot of detailed information and numbers. FICO, formerly known as Fair Isaac, is a company founded in 1956. Its first major product was the FICO score — a numerical summary of all the data in a person’s credit file that would give a credit manager a quick, easy way to determine if the potential customer was creditworthy. Today FICO has numerous competitors in the credit score business including the major credit agencies. Each offers its own tweaks to the service, but the underlying principle remains the same: analyze the data in a credit file to give a quick, easy-to-understand summary. Get to the source If you want to understand and possibly improve your credit worthiness, start by taking advantage of your right to review your credit file. For direct, commercial-free access to credit reports online, go to www.AnnualCreditReport.com. You will have to provide the site with your Social Security Number. AnnualCreditReport.com is the only source authorized by the Federal Trade Commission (FTC) for access to free credit reports. Other websites may require you to provide a credit card number and will try to sell you products such as credit scores and protection plans. Another quick and efficient way to get your free credit report is to order it by telephone. Each system will initially direct you to its website, but eventually, you will have the opportunity to order a free “credit file disclosure” that will be delivered by mail. You will need your Social Security Number, date of birth and address to obtain the report. The three major sources from which to request your report are:
Correcting information in your credit file Under the terms of the Fair Credit Reporting Act, credit agencies are responsible for correcting inaccurate or incomplete information in your credit file. To make corrections to your file, send a “dispute letter” to the credit agency. Include copies (not originals) of the information in question and any backup documentation that you have to support your position. The credit agency is required by the law to respond to your letter within 30 days. For more information about correcting errors visit the FTC website at www.ftc.gov. Search for “Building a Better Credit Report” for an excellent overview and detailed “how-to” information. Instant credit score If you’re simply curious about how your credit file looks and want a quick overview — a credit score — you can visit www.quizzle.com. This website, launched in February 2008, uses data from Experian to provide a FICO-like credit score. The website offers credit protection and a variety of other paid services. Creating an account is free, and it will not require you to provide a Social Security Number. According to information from the site, the company is part of the Intuit corporate family. The site has received favorable reviews by reputable sources such as the Wall Street Journal, and web searches do not reveal any complaints of abuse or fraud. Consult your CPA Professional financial advisors strongly encourage individuals to review their credit reports annually. It’s an opportunity to be proactive and address issues rather than waiting and reacting to a bad credit score. As you review your financial situation and chart your future plans, remember that your local CPA can help. Your CPA can offer the advice and information you need to make smart financial decisions. The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.” Why You Need a Home Inventory | TopWould you be able to list all the contents of your home if you had to? Most people could not, which is why it’s a good idea to put together a written home inventory. The Virginia Society of CPAs (VSCPA) explains why this is a smart step and offers tips on how to do it. Several important uses A home inventory can help you determine what needs to be replaced if you are the victim of a burglary, fire or other disaster. There are three key reasons that the inventory will come in handy. First, having a full catalog of your home contents should help you get a speedier reimbursement from your insurance company. It will also make it easier to identify any losses you might want to claim for income tax purposes. In addition, before any problems occur, the inventory will give you a realistic sense of what you have and help you decide how much insurance you need. How to get started An inventory is simply a list of what’s in your home, including a short description of each item. When you’re putting it together, you should collect any information you have on the items in your home, including your purchase receipts and any appraisals that have been done. Organize the inventory by room, listing everything that’s in each location before going on to the next. Don’t forget pictures While a written inventory is important, it’s also a good idea to take photographs of every room that will help back up the information in your inventory. Take several pictures of each room so that all the items are easy to see. Then attach these pictures to the related list in your written inventory. If possible, you might also want to make a video of your home, walking slowly through each room and describing what’s being shown on camera. Focus on the valuables Even the smallest or least costly items will add up if you have to replace them after a theft or disaster, so be sure to get everything. For clothing, it may be easiest simply to count all your shirts, pants, dresses, shoes and other kinds of apparel, rather than listing each item. The same is true of china, silverware and linen. Remember, though, to pay special attention to the most valuable things, including jewelry, art, antiques and electronics. Be sure to include as much information as you can about them in your inventory and take pictures of each one. You should also contact your insurance agent about these items because some of them may need added coverage depending on their type and value. Keep it safe Of course, it’s important to safeguard your inventory so that it isn’t destroyed by any disasters that damage your home. Either store it in a safe deposit box or ask a trusted family member or friend to hold on to it for you. It might be best to choose someone who does not live in your area, so that their home is not struck by any local natural disaster that affects you, too. You might also email the inventory to yourself and a friend so that you can download the file when you need it. Turn to your CPA Remember to consult your local CPA with any questions about your family’s finances, including whether your insurance coverage is adequate and how best to protect yourself from risk. Your CPA has the expertise to answer your most important financial questions. The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.” Get Healthy, Save Money! | TopThere are many reasons to maintain your good health, but did you know there were some great financial reasons to do so, as well? With some planning and a little time, there are ways to watch your budget and still create a healthy lifestyle. The Virginia Society of CPAs (VSCPA) explains what you need to know. Cutting health care costs You should never scrimp on necessary medical services or medications, but there are ways to reduce your need for medical care down the road. You’re probably well aware of the skyrocketing price of health coverage in the last decade. In fact, even people with employer health insurance paid an average of more than $700 annually in out-of-pocket costs for medical care, including deductibles, co-payments and coinsurance, based on a study by the Commonwealth Fund. That amount is 34 percent higher than three years earlier. Of course, when you take care of your health, you will need fewer medical services, which could potentially save you hundreds of dollars per year. More smart steps Some commonly used medications are used to treat problems with high cholesterol, high blood pressure and diabetes. While there are many factors behind these conditions, they each can be worsened by a poor diet and lack of exercise. That means that the preventive steps you take can potentially help you avoid the costs of medications or further procedures to treat such conditions down the road. Eat right Meals using fresh fruit, vegetables and lean protein are often much less costly than those made with processed foods or takeout dinners. Also local farm markets and warehouse stores frequently offer good prices on fresh ingredients. Cooking at home is another great way to lower your costs and improve your health. Prepared meals are not only costly but may be full of salt, fat and calories. When you make your own meals, you can skip all those unhealthy ingredients. Check online to find websites with healthy recipes that will get your home cooking started. Get physically fit It doesn’t have to cost a lot to stay fit. Instead of joining a gym, start a walking or running program right in your own neighborhood. If possible, walk or bicycle to and from errands. This will not only improve your health, it will cut down on gasoline costs. The stairs are also free, so use them instead of an elevator whenever possible. In addition, an inexpensive set of barbells can help you with your strength training, and a jump rope and stability ball are other cheap fitness options. If the price of new equipment seems too steep, check out local garage sales for less expensive finds. Quit the habit With a pack of cigarettes running in the $5 range, pack-a-day smokers would save nearly $2,000 a year if they gave up the habit. If that’s not enough incentive, many companies are no longer hiring smokers or insisting that current employees give up smoking in order to hold on to their jobs. Add to that the costs of dry cleaning and teeth cleaning that accompany smoking, and the benefits of stopping now are clear. Consult your CPA You may be surprised by the changes you’ll see if you make healthy changes in your lifestyle and eating habits, including finding a little more money in your bank account at the end of the month. If you want to learn more about how to spend your money wisely, your local CPA can help. Turn to your CPA with any questions you may have about your family’s spending or saving choices. The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 9,000 members who work in public accounting, industry, government and education. The money management columns are a joint effort of the VSCPA and the American Institute of CPAs, as part of the profession’s nationwide 360 Degrees of Financial Literacy program. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (804) 612-9424. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.” |