The American Institute of Certified Public Accountants has a 20-point list of year-end money changes you should make.
Here what you should think about doing heading into the new year:
- Finally make a budget!
- Get clear about needs vs. wants!
- Make a plan to defeat credit card tnterest:
- Compound interest works both ways -- look to zero out your credit cards now.
- You get a free annual credit report from all the reporting bureaus -- get yours and make sure the information there is accurate. If not, contact them to make corrections.
- Make an emergency fund:
- Your tax return is a good source of income to get you started.
- Three months of living expenses if single.
- Six months of living expenses if married with children.
- Evaluate your insurance coverage:
- Have enough coverage, but not too much!
- Do you have an umbrella?
- Are you getting the best discounts by having all coverage through the same carrier?
Find more money and budgeting tips at the Money Monday page.
More helpful links:
- Financial empowerment: Getting your financial life on track
- 12 Ways to Revive Your Financial New Year’s Resolutions
- Advance Directives -- Planning for Medical Care in the Event of Loss of Decision-Making Ability
- MIPeaceofMind -- MICHIGAN’S ADVANCE DIRECTIVE REGISTRY
- Advance Directives Booklet and Forms
- IRS -- Required Minimum Distributions (RMDs)
- IRS -- Distributions from Individual Retirement Arrangements (IRAs)
- Required Minimum Distribution – How to Plan Smart
- 6 Important Retirement Plan RMD Rules
20 Financial Resolutions for 2020 from the AICPA:
1. Finally Create that Budget “This is a perfect time to review past bank and credit card statements, and sources of income to create a baseline of income and expenses. Once you have this baseline, break down all expenses into ‘needs’ vs. ‘wants’; review each ‘need’ to confirm it is a true need and then do the same for wants. The goal here is to weed out any ‘want’ that is negatively impacting your overall budget. Americans who need help creating and managing a monthly budget can use the AICPA’s budget analysis calculator to run a report that will show them where their money is going and identify areas for improvement.” – David Almonte, CPA/CGMA member of the AICPA Financial Literacy Commission
2. Develop a Plan to Defeat Credit Card Interest “The miracle of compound interest can work against you in the same powerful way it works for you. Sharpen your budget to designate an amount each month to attack those high interest rate credit card balances. Pick the strategy that works best for you – pay off the small balances first to build momentum or set your sights on balances with the highest rates to magnify your interest-reduction power. You’ll see the impact compound over the year, as the amount you owe decreases and you keep more of your earnings, allowing you to pick up the pace toward a debt-free future.” – Neal Stern, CPA member of the AICPA Financial Literacy Commission
3. Build That Emergency Fund “Commit to adding to or creating an emergency fund with roughly 3-6 months’ worth of living expenses in an account earmarked for emergencies. Start by contributing whatever you can afford each pay period or month. Large sums of money are accumulated through small, consistent investments over time. Remember, without enough emergency savings, you won’t have an adequate buffer between you and high-interest debt. The key is to build up a large enough emergency savings account to effectively manage unexpected hardships.” – Robert Westley, CPA/PFS member of the AICPA Financial Literacy Commission
4. An Emergency Preparedness Plan Starts with Being Prepared “In the face of a natural disaster, having a plan in place will help to ensure you can focus on what’s most important, while also minimizing the financial impact. There are some documents you will need right away, and others that you may not need right away but will be very difficult to replace if they are lost or destroyed. The key documents to get your emergency preparedness plan started are detailed in, ‘Disasters and Financial Planning: A Guide for Preparedness and Recovery.’ This guide is full of checklists and actionable steps for people to take to help ensure they are as prepared as they can be for the financial impact of a natural disaster.” – Neal Stern, CPA member of the AICPA National CPA Financial Literacy Commission
5. Evaluate Insurance Coverage “Take a look at your insurance coverages for auto, home, liability, etc. to be sure you have enough coverage (not too much!) and that you’re not overpaying. Look at whether you could raise some deductibles to save on premiums or if you have some unnecessary ‘extra’ features in your policy that are adding up. Comparison shop among insurance companies to see whether switching makes sense. It pays to compare periodically as different companies adjust pricing frequently to meet competition or get more competitive at times in certain markets.” – Monica Sonnier, CPA member of the AICPA Financial Literacy Commission
6. Finally Get Your Credit Report (For Free!) “Obtaining your credit report (and one for your spouse/children) can be done for free on an annual basis. Be sure to review your credit report, at least annually, for completeness and accuracy, and if any errors are found, correct them right away. An incomplete or incorrect credit report could be the reason you were denied that latest job, loan request, or charged a higher interest rate.” – David Almonte, CPA/CGMA member of the AICPA Financial Literacy Commission
7. Keep Watch for Fraudulent Activity “Protecting your personal and financial information is an ongoing process that requires you to be vigilant. Reviewing your online activity routinely both helps you gain a better understanding of where your money is going, and it enables you to detect and report fraud earlier. I recommend you start with a weekly review. If you see a transaction that you don’t recognize, call your bank. The earlier you detect fraudulent activity, the easier it is to stop it.” – Diane Wightman, CPA member of the AICPA Financial Literacy Commission
8. Take a Hard Look at Recurring Payments “Automatic withdrawals from digital subscriptions and anything that started out as a free trial can wreak havoc on your finances if not kept in check. This is a great first place in your budget to review when looking to rein in spending. Redirect money back into your own wallet by cancelling what you don’t need or use. The sooner you start, the more of your hard-earned money you can reclaim.” – Neal Stern, CPA member of the AICPA Financial Literacy Commission
9. Schedule Frequent Family Financial ‘Check-Ins’ “Most financial stress comes from not discussing the tough planning issues head on. Tough conversations are only tough until you have them. Once you have the conversation, you can make a plan to bring you closer to your financial goals. Schedule a weekly, monthly or quarterly financial ‘check-in’ with your partner, or just by yourself, to review your financial outlook. By doing so on a frequent basis, you allow yourself time for a course correction if things go awry.” – David Almonte, CPA/CGMA member of the AICPA Financial Literacy Commission
10. Make Shopping Strategies to Curb Retailers’ Selling Strategies “Merchants have powerful strategies to encourage you to spend, sometimes fueling purchases with emotion that can outmaneuver your financial reasoning. You can even the playing field by entering the retail arena with a plan for what you need and can afford. Check prices online before, or even while in the store, to be sure you’re getting the best deal. For those tempting impulse buys, try a ‘24-hour rule’ where you place any unplanned purchases on hold to see if you still want the item a day later. You may be surprised at just how much money you can save with this simple strategy.” – Neal Stern, CPA member of the AICPA Financial Literacy Commission
11. Use Rewards Programs to Get Free Things “Review your shopping activity for the past year to identify where you shop for groceries and clothes most often. Check to see if those retailers have a free rewards program. If yes, sign up and load that information into your phone. Next time you shop, be sure to swipe your information at the checkout. If the store offers electronic coupons, download those as well. Before you know it, you’ll have a certificate to redeem for a free cup of coffee, sandwich or even cash back rewards.” – Diane Wightman, CPA member of the AICPA Financial Literacy Commission
12. Sell Unused or Old Household Items “Many people have stuff sitting around their house that they never use. This includes clothes, sports equipment, furniture, tools, and other items. Selling these things can generate hundreds or even thousands of dollars of cash that can be put towards your financial goals. And as an added perk, it will keep you more organized and efficient too. Parting ways with items you’ve owned for long periods of time can be the hardest part. To make this easier, I’d recommend a rules-based approach (i.e. if I haven’t worn a shirt in over 1 year it needs to be sold).” – Matt Rosenberg, CPA/PFS member of the AICPA Financial Literacy Commission
13. Make 2020 Contributions as Early as Possible “Make your contributions to tax-advantaged accounts, such as IRAs, 529s, and workplace retirement plans, as early in the year as possible. By making these contributions earlier rather than later, you will benefit from additional tax-free compounding growth, which can be substantial over time. Time is an asset for financial growth– investors should take advantage of it by making their contributions to any tax advantaged accounts as early in the year as possible.” – Robert Westley, CPA/PFS member of the AICPA Financial Literacy Commission
14. Take Full Advantage of All Your Employee Benefits “The benefits package employers provide is a big part of our total compensation. Still, the responsibility is on you, the employee, to make sure you’re taking full advantage of it to improve your financial wellbeing and quality of life. Always explore all the benefits included in your package. There are so many new and creative benefits being offered today that can save you real money, offer resources to support you outside of work, and even help you in your career development. Check with your Human Resource department to learn more about all the benefits that your company offers.” – Jina Etienne, CPA member of the AICPA Financial Literacy Commission
15. Teach Kids Another Good Habit– Money Management “The more opportunities children have to practice making decisions about money, the more confidence they’ll build and the greater likelihood that they’ll make sound, responsible decisions on their own. Parents are already focused on teaching good habits; managing money is one more habit where starting early helps. The more you engage a child in financial discussions, the more likely they are to learn. By including them in the conversation, even when they aren’t making the decision, you are helping them understand the process and setting priorities which will teach them good habits that they can then apply themselves.” – Margaret Poster, CPA member of the AICPA Financial Literacy Commission
16. Shop Around for Better Banking Deals “The bank down the street may be convenient, but that doesn’t mean it’s the best place to keep your cash. By not comparing rates amongst a variety of banks, credit unions, online-only and mobile-first options, you may be shortchanging yourself. Keep in mind that not every financial institution offers the same terms and conditions for opening a savings account. Some may offer alluring rates to get you to switch, and then decrease them after a few months. Do your research before signing any contract. Though tedious, it pays to shop around for higher rates to make sure your money works as hard as you do." – Dr. Sean Stein Smith, CPA member of the AICPA Financial Literacy Commission
17. Buy in Bulk “Even if you don’t have a membership to a wholesale club, if you have a friend who does, you can shop together and divide up the lower unit cost bulk items. This strategy can also work for those of us with limited space since you’re only taking home your share of what you buy together. By shopping this way, the cost per unit you pay can be well below the per-item prices at the supermarket.” – Richard Ward, CPA/PFS member of the AICPA Financial Literacy Commission
18. The Home Dining Experience “If restaurant visits have become more of a routine than part of your enjoyment, try cooking for yourself. You’ll save money, plus waiting time, while also having more control over what you eat. Along with solid savings, this can bring you less travel time, more family time, and possibly a healthier diet.” – Richard Ward, CPA/PFS member of the AICPA Financial Literacy Commission
19. Create a Savings Goal “Experts typically recommend saving anywhere between 10 percent and 15 percent of your annual income (or more) towards retirement. With pension plans mostly being a thing of the past, the accountability now falls squarely on the individual. The earlier you start saving, the faster you will reach your savings goals and the less pressure you will put on yourself down the road.” – David Almonte, CPA/CGMA member of the AICPA Financial Literacy Commission
20. Learn the Investing Basics “Before investing your hard-earned money, it is important to do some research. Arming yourself with a solid baseline of knowledge, including the definitions of key investment terms, can greatly help your ability to determine what investments fit your financial goals. The AICPA’s 360 Degrees of Financial Literacy website has some great resources to get you started in their Investing Basics section including articles to help you determine what your risk tolerance is and calculators to show you how your investment can grow over time.” – Susan Speirs, CPA member of the AICPA Financial Literacy Commission