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Virginia CPAs Offer New Year’s Financial Resolutions

It's the time of year for popping champagne corks, tossing confetti and making New Year’s resolutions. Losing a few pounds and quitting smoking are some of the most common resolutions. This year, how about making a pledge to improve your finances? The Virginia Society of CPAs (VSCPA) offers the following suggestions to help you get your money matters in order.

1. Create a budget

A budget doesn’t have to be a complicated mathematical calculation. Determine your income and expenses for each month by reviewing your checkbook, bank statements and receipts for the last year. Don’t forget that little things add up, so track what you spend in cash for 30 days. You’ll be able to see where your money is going and make the appropriate changes.

2. Reduce your expenses

Spending less is easier than earning more, so take advantage of every opportunity to save money. Clip coupons, buy off-season and avoid impulse purchases. Don’t forget that small changes add up. Saving $2 a day at the vending machine puts $500 a year back in your pocket. Where can you make other cuts? Take a look at your cell phone or cable/satellite TV bills. Bundle services for a lower monthly rate or cut back on channels and features you don’t use.

3. Create an emergency fund

Unplanned expenses happen. Whether it’s a trip to the emergency room, a car accident or a layoff at work, having an emergency fund can save you from borrowing money when the unexpected occurs. Experts suggest setting aside three to six months of living expenses for when you need it most.

4. Pay down your debt

Try to wipe your credit slate clean. Add up how much you owe on each of your credit cards. Then create a plan for paying off your debt, starting with the credit card with the highest interest rate. In addition, call each of your credit card issuers and try to negotiate a lower rate. Going forward, resolve to make all purchases with cash or a debit card to ensure that you spend only the amount you have. Use your cash for more worthwhile purposes than paying the credit card company.

5. Save more

A benchmark for how much of your personal income you should save is approximately 10 percent. However, Americans are currently hovering around 5.8 percent as a personal savings amount. To boost your savings rate, set up an automatic deduction from either your paycheck or checking account to a high yield savings account.

6. Max out your retirement options

The earlier you start saving for retirement, the better. If your employer offers 401(k) matching, be sure to take advantage of this opportunity for free money. If you’ve already maxed out your 401(k), consider a traditional individual retirement account (IRA) or Roth IRA. The maximum 401(k) and IRA contribution limit in 2011 is $16,500 (pre-tax). If you are more than 50 years old, the maximum contribution is $22,000.

7. Make a will

No one likes to think about dying, but a will can ensure that your assets will be divided according to your wishes. Now is the time to make decisions about who should have your power of attorney in case you are incapacitated. Don’t let the government decide who will care for your family or how your assets will be allocated. This is also a good time to review your insurance coverage.

8. Do some good

Extend the season of giving all year round by contributing something from each paycheck to a charity you support. Giving helps focus on others and keeps finances in perspective. Not only will you be helping someone in need, but you may earn a tax deduction for next year's return.

9. Raise your tax IQ

Probably the most important, but under-planned, financial action for most people is related to taxes. While some tax-saving activities can be executed at year-end, others require time and planning. The Internal Revenue Service’s (IRS) website, www.irs.gov, is a good starting point to maximize your refund.

10. Educate yourself

For more smart financial tips, check out www.FinancialFitness.org, a website created by Virginia CPAs to help you build a solid financial future. There are many simple ways to make good money management a resolution you can keep. Ask your CPA for advice on the steps necessary to make a real difference in your financial life, now and throughout the New Year.

Resolve today to make decisions that will improve your financial strength in 2011, and you’ll be on your way to achieving your goals. Small changes can lead to big returns over the course of the year and the long run. If you have questions about improving your financial health, your local CPA can help.

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.”