As the end of another year approaches, many of us begin thinking about ways we can improve our lives for the coming year. Common goals are to lose weight or to begin an exercise program. It is equally important to take the right steps to build and maintain good financial health. Here are some basic, easy-to-follow tips to finish off 2012 right and to make your 2013 a financially successful year.
Strong Financial Finish to 2012
1. Watch Holiday Spending — It’s easy to spend more than you can afford. Low sale-prices are alluring. You don’t even have to go looking for them; you probably have been emailed “great deals” every day. Don’t focus on how much you’re “saving” when you make a purchase, but on how much you’re spending. If you choose to finance a purchase or use a credit card, be sure to factor in any interest costs you will pay. Set a holiday spending budget and stick to it.
2. Gather Tax Documents — Start getting your tax paperwork in order. Position yourself to file your taxes as soon as you receive your W-2 or 1099,s in early 2013. The earlier you file your return, the less time it takes to process your return. Early filers often have their refunds in a week’s time. Make sure that you take advantage of any tax deductions available to active-duty military members.
3. Evaluate Your Retirement Plan — Make it a yearly practice to review your retirement account. Set a goal of putting away at least 5% of every check, and have it automatically deducted from your paycheck. Check the investments you’ve selected, to make sure that you have the right balance. Take full advantage of any employer match, if you or your spouse is eligible. That is free money! Make a large year-end contribution, if necessary, to get the maximum employer match.
Start 2013 Right
4. Make a Budget — A budget is the basic cornerstone of a healthy financial life. It doesn’t cost a penny to make a budget. Use one of the free budget tools you can find online. You should know how much income is coming in and how you spend your money. A budget should account for your regular monthly expenses as well as expenses that occur from time to time (e.g., property taxes, car registration, seasonal spikes in utilities, and vacations). Military families move more often than the average Americans. If you’re going to move in 2013, make sure to budget for moving expenses. Stick with it. Keeping a budget, just like a diet or exercise, pays off when you keep working on it.
5. Rainy Day Fund — Make 2013 the year that you build up a fund to cover emergencies and unforeseen expenses. Set a goal of saving enough to cover six months of your monthly expenses. That may feel like a big goal, but don’t let the size of the goal discourage you from getting started. Ideally, you should set aside a small amount from each paycheck. Use the same strategy to build up money for other, important expenses like a vacation fund. Depositing your tax refund or a holiday work bonus is a great way to build up your fund more rapidly.
6. Pull a Free Credit Report — Maintaining good credit is an important part of your financial health. Your credit not only affects the interest rate you’ll get on a mortgage, auto loan or credit card, but it can affect your ability to find a house to rent or how much you pay for insurance. For some military positions that require a security clearance, bad credit can jeopardize your career advancement. Be sure to check your credit report regularly. You can get a free credit report at annualcreditreport.com. Check your report carefully and dispute any inaccurate information.
7. Evaluate Debt Options — Most of us are carrying some kind of debt, whether it is a mortgage, a car loan, a student loan, or some credit card debt. Whether your debt is causing you problems or not, you may be able to improve your financial health by changing how you handle your debt. Do you even know how much debt you have and how much interest you’ll pay on it? Use the new Bills.com debt consolidation calculator, to see the true cost of your debt and to learn about different strategies you can use to reduce your costs. If you’re starting 2013 struggling with debt, review all the debt relief options available and start working on a plan to resolve your debt problems and reduce your stress. Use the resources the military makes available to help you evaluate any debt relief solution you consider, to make sure that it is both the right solution and that it won’t harm your military career.
Ethan Ewing manages Bills.com, a website business which provides practical financial advice and resources to everyday people. Prior to joining Bills.com, Ethan was a Vice President for Experian Interactive, a leader in online marketing and advertising, where he was responsible for developing online partnerships with many of the internet's largest properties. Ethan has also built a website business for Ameriquest Mortgage, managed a mortgage origination operation and consulted on secondary market bulk mortgage acquisitions. Ethan received his BA from Denison University, where he was a captain of the men's lacrosse team.
Bills.com's goal is to help Americans better manage their financial matters, with a focus on monthly budgeting and cutting expenses. Check out www.Bills.com/IQ to get your free BillsIQ score and find out how financially fit you are.
One of the hardest things to understand about military pay is that while it is paid twice a month (usually), it is calculated on a monthly basis. Back in the dinosaur ages, military pay was paid one time per month. At the end of the month, the finance folks would calculate everything due for the [...]