(WTNH) — The beginning of the year is the perfect time to take a look at your finances. Jeffrey Corliss, Executive Director of RDM Financial Group at High Tower shares his money managing tips.
A good financial advisor can help you put all the moving parts of your finances together. If you decide to do it yourself, Corliss suggests making sure you understand where you are financially.
- Understand what you have and what you owe. Do the homework to put together what you have and what you owe (net worth statement). Put together a list of bank and investment accounts and debts (credit card, student loan, mortgage, auto loans).
- Understand and manage what you spend. This is probably the one thing that people do not look at or put together. After return on your investments, expenses are one of the most significant items that will make or break your financial plan over time. Start by reviewing your spending from 2017, most banks and credit cards will provide you with an annual summary. Put together a budget, most people want to save more but really don’t know where their paycheck goes. If you can’t get all the details together, don’t let this get in the way of getting started with this very important step. Look at your annual gross pay less what you put towards savings for the year (after taxes). The difference is what you are spending.
- Make a plan to manage your debts. If you have debts, put a plan in place to reduce credit card debt. In general, credit cards should be paid off monthly, but if you are carrying balances on credit cards you will never get out from under them if you only pay the minimum amount. Payoff the card with the highest rate first by making additional payments towards these cards. For mortgages, if you can afford it, make extra payments on these as well. In addition, run your credit report from all the major credit bureaus at least once a year to identify debts are being reported correctly (free annually from annualcreditreport.com).
- Review your Investments. Return on investments is one of the most significant items that can make or break your financial plan. Given the strong gain in stock market for 2017, review how your investments are allocated amongst various asset classes to make sure they are still appropriate. You may need to rebalance your investments. Schedule a visit with your investment advisor to review how recent tax law changes may impact what you should be investing in.
- Maximize your retirement plans. If you have a retirement plan through your employer and you are not contributing the maximum, increase your contributions. Make sure you are at least contributing enough to take advantage of employer match contributions. If you are young and/or in a low tax bracket, consider maxing out on employer provided Roth accounts before the traditional 401(k) plans. Currently Roth accounts are not subject to required minimum distribution rules. If you are self-employed and have net income, consider setting up a SEP-IRA and contributing the maximum amount by the due date of your return.
- Learn how the new tax law impacts your finances. Schedule a visit with your tax advisor and attorney as soon as possible. Given the change in the federal tax code, they can help make sure that you are doing all that you can to minimize your taxes under the new rules. The new law has a plethora of changes impacting many different areas of the tax law so be proactive.