Are you satisfied with the financial decisions you made in 2014? If you’re not so sure, this is a good time to resolve to make some changes in 2015. The Virginia Society of Certified Public Accountants (VSCPA) offers these tips on the best ways to avoid some common pitfalls.
Mistake #1: Letting Your Debt Get Out of Control
Among Americans with credit cards, the average balance in the second quarter of 2014 was $5,596, an amount it would take most people months or years to pay off. And every month those balances remain outstanding, the more the interest charges add up. If you’re wrestling with high credit card balances, try using cash only for your purchases so that you don’t run up any more debt. Pay as much as you can each month on your credit card bills and consider shifting your balances to lower-interest accounts. In addition, check your credit scores once every four months to be sure there are no fraudulent purchases on your accounts or simple mistakes that are hurting your credit score.
Mistake #2: Making Late Payments
Whether it’s your credit card or a utility, you’re probably going to be charged a late fee if you don’t pay that bill on time. Start by noting when payments are due on your calendar so it’s easier to remember them. If you don’t have the cash on hand when the bills come, contact the companies to see if your payment deadline can be moved to a few days after your paycheck arrives. If you can’t afford your payments, it’s also a good idea to call your creditors. Explain your situation and see if you can work out an arrangement that allows you to make smaller payments over time. If you find yourself scrambling to pay your bills often, review your budget to determine ways to lower your spending, if possible. Late fees are unnecessary expenses, so it’s worthwhile to take some time to determine how you can avoid them.
Mistake #3: Sidestepping Saving
No matter what your age, it’s always a good idea to set aside a little money in an emergency fund that will cover unexpected major expenses, a loss of income or another unpleasant surprise. The older you get, of course, the more important saving for retirement becomes; it’s never too early to start. Saving is easier when you arrange to have a set amount deposited into a savings account each week or into a retirement account. And you’ll be surprised at how quickly your money grows.
Mistake #4: Losing Out on Retirement Dollars
Did you know you can miss out on significant retirement income by retiring too soon? Full retirement age for collecting Social Security payments is above 65 for most current workers, depending on when you were born. If you retire before then, you will receive less than your full benefit for your lifetime. Your marital situation and other financial circumstances can also affect your best retirement decision, so be sure to turn to your CPA for more details.
Mistake #5: Failing to Plan Ahead
Many of life’s milestones can be very expensive. Buying a house, having a child, changing careers, sending children to college or entering retirement all can have a profound impact on your financial situation. If any of these steps is in your future, be sure to begin preparing financially as far in advance as possible.
Your Local CPA Can Help
This list of potential mistakes may seem daunting, but your local CPA can provide valuable advice that will help you make the best decisions. Be sure to contact him or her with all your financial questions or concerns.