For many people, managing their finances feels like an overwhelming task. Our lives are incredibly busy as it is, and folks in my line of work tend to throw around acronyms and jargon until too many people just throw their hands up in despair. It all can seem so overwhelming and some of us simply never get started.
Fear not. It really doesn't have to be that way. There are four simple things you can do over the course of the year to get on the road to financial responsibility. These things don't take very long and can help you make some sense of your finances, stay on track for your financial goals (whether you just want to pay the bills, get rid of debt or even save for a major purchase, like a house or a car) and avoid problems – or at least deal with them early, when they're easier to resolve.
So mark your calendars now for 2014, and use these simple steps to get and stay on track with your finances year after year. Remember, everyone has to start somewhere.
|Jan. 15: Check Your Credit Reports|
Under federal law, you are entitled to one free credit report every year from each of the major credit reporting agencies. (There are also tools, like ours at Credit.com, where you can access a free detailed overview and analysis of your credit profile as well as a credit score -- which is updated every 30 days).
By getting your credit reports at the beginning of the year, you can see how your holiday spending may have affected your credit score, make sure that your credit reports are accurate (and, if they are not, start the process to fix them) and make plans for the coming year – especially in light of Valentine's Day and Homage to the IRS Day: either (or both) of which has blown a hole in the best laid budget plans of many.
Having presumably made a gaggle of resolutions for the new year – maybe even some about your personal finances – knowing what's in your credit report and making sure that everything a lender will see is accurate (or at least compellingly explainable) can help you make those resolutions a reality.
|April 15: Remember Your Uncle (Sam)|
I can't think of anyone, other than a tax collector, who looks forward to April 15. That said, whether you think you "owe" the government money or not, it's all about formulas -- and a guaranteed recipe for disaster if you ignore or try to avoid it. While you don't have to wait for April 15to pay up, if you need time you can certainly get an extension until Oct. 15. However, why pay interest – and perhaps penalties – if you can avoid them? The one benefit to paying your taxes early, beyond receiving your refund earlier, is that you might reduce your risk of tax-related identity theft.
Knowing and paying what you owe in full is an important part of maintaining your overall financial health.
If you find yourself overwhelmed by the complexity of it all, don't hesitate to get software to help, or seek out a professional tax preparer. There are a number of great computer programs on the market that simplify the process. Just make sure you are getting the right one by doing some research. If you make less than $50,000 a year or are a low- or moderate-income senior, there are government programs that will help you prepare and file your taxes at no charge.
|July 15: Review Your Spending, Budget and Plans for the Rest of the Year|
The last half of the year can wreak havoc on even the most scrupulous budgeter's plans, between estimated taxes, vacations, emergencies, and back-to-school and holiday spending. So when the weather gets hot, take a couple of hours in front the air conditioner and review your spending for the first six months. Check out your bank and credit card statements to identify spending patterns that are draining your bank account and preventing you from meeting your financial goals. (Pay particular attention to the daily lattes, tanning sessions and online shopping sprees.) Also, take a moment to review your paid subscriptions and figure out whether you are really using them or not – then cancel the ones that you don't need.
If you carry balances on multiple credit cards, take some time to research whether a balance transfer makes sense (hint: read the fine print), and budget carefully to give yourself greater cash flow to start paying them down. Look at how much you spent during the last back-to-school and holiday shopping seasons to create a budget for this year then try to build some savings into every pay period to create a reserve. If you really can't, commit now to spending less this year (and mean it). It's not always pleasant – so after you're done, reward yourself with something that makes you happy (go hug your dog or cat).
|Oct. 15: Review Your Health Insurance Plan|
Every year, you have the opportunity to review your insurance plan and make changes – and, with the rollout of Obamacare, you will be required to have (or buy) health insurance or pay a penalty. Note that the lack of any or enough health insurance drove 1.7 million Americans into bankruptcy last year and caused another 56 million to suffer financial hardship. Don't assume you are covered simply because Obamacare is going into effect in early 2014.
Take an hour or two, review all your options: Can you get health insurance through your employer; can you get a better deal through the exchanges; or is the issue moot because you qualify for Medicaid or Medicare? Calculate what they cover, how much you might have to pay out of pocket, to what limits you might be subjected and what level of coverage meets the healthcare needs of your family now (as well as in a worst-case scenario). If you find the process too overwhelming, ask an insurance agent or go to a designated "Navigator" (go to Healthcare.gov to access a list of designated Navigators).
This is by no means an exhaustive list of everything you could (or should) be doing to keep up with your finances today and ensure a financially secure tomorrow – but it is a reasonable start to understanding your financial picture without adding an additional level of complexity to your already hectic life. It requires little more than a few hours each quarter for you to begin to get your finances on track and your head in the game. Once you get the hang of it, you can start to add in other pieces, like planning for your children's education as well as your retirement. Just "keep calm and carry on!"
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.