New Years Financial Resolutions: Virginia CPAs Offer Tips

It's the time of year for popping champagne corks, tossing confetti and making New Year’s resolutions. Many of those resolutions are likely to focus on better financial management. The Virginia Society of CPAs (VSCPA) offers the following suggestions to help you get your money matters in order:

1. Organize your financial records

Organizing your financial and family records can save you time, money and trouble. Sort through the paperwork you’ve been collecting and move important permanent records, such as birth certificates, wills, property deeds and trust agreements, to a secure fireproof location off your premises. Other records can be organized within a file cabinet or whatever system works for you. Just be sure that your family members know where all your important paperwork is stored.

2. Pay off holiday debt quickly

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.

3. Save, save, save

Make saving a priority and pay yourself first. Don’t wait until all your bills are paid and you end up neglecting your savings. Most banks and investment companies have processes that enable money to be deposited directly from your paycheck or checking account into a savings or investment account.

Next, pick two or three spending categories — entertainment and clothing, for example — and try to trim 15 or 20 percent from the amount you typically spend. Divert this money to your savings account and you’ll be surprised how quickly your balance grows.

4. Check your asset allocation

Rebalancing is an essential part of managing a portfolio, and the beginning of the year is an opportune time to compare your current asset allocation to your target allocation. If any of your asset classes move off target by 5 to 10 percent, take steps to rebalance your portfolio.

5. Make a will

Start the new year by resolving to create a will — if you don’t already have one. A will ensures your personal belongings and assets will go to the beneficiaries you choose. If you have children, a will also allows you to appoint a guardian to care for them in the event of your death. Without a will, that decision may be left to the courts.

6. Review your insurance policies

You should review your homeowner's insurance at the start of each year to determine whether or not your policy amounts are keeping pace with the increased value of your home. Do the same with your life and disability insurance to ensure you have sufficient coverage.

7. Boost your retirement savings

When it comes to investing for retirement, it’s never too late, or too early, to start. For 2007, you can contribute up to $15,500 to your 401(k) plan at work — $20,500 if you’re age 50 or older. If you can’t afford to put that much aside, make every effort to contribute at least enough to qualify for the full company match. If you don’t have a retirement plan at work, consider opening an Individual Retirement Account (IRA), Roth IRA or Simplified Employee Pension (SEP) plan.

8. Make tax planning a year-round activity

While some tax-saving activities can be executed at year-end, others require time and planning. Examples include offsetting investment gains with losses, shifting income, restructuring your debt to take advantage of tax-favored borrowing and maximizing your itemized deductions.

9. Plan for unexpected milestones

Rising health care costs, insufficient retirement benefits and longer life expectancies mean that you may have to care for aging parents. The average age of widowhood in the U.S. is 56. Approximately 40 to 50 percent of marriages in the U.S. will end in divorce. It is important to plan financially for these unexpected milestones.

10. Take advantage of free financial resources

For more smart financial tips, check out www.FinancialFitness.org, a Web site 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 year.

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 approximately 8,300 members who work in public accounting, industry, government and education. For more information, please visit the Press Room on the VSCPA Web site at www.vscpa.com, e-mail communications@vscpa.com or call (800) 733-8272. For more information on financial literacy topics like money management, or to search for a CPA in your geographic region, visit www.FinancialFitness.org.