What are some of the most important financial planning tips everyone can use, and some of your most financially savvy friends are using right now? Creating a financial plan is by far the best way to reach your financial goals, and it does not need to be expensive. Everyone’s financial circumstances are different and there is a lot you should be thinking about. Upswing Advisor has come up with their top 3 most important financial planning tips that anyone can use, for free.
1) Understand your Expenses
We often think we only have control over our discretionary spending like entertainment, dining out, or buying high priced luxury goods. But when was the last time you took a long hard look at your cable bill – do you really need the Ultimate Deluxe package with 2,500 channels? When was the last time you received new quotes for your property and casualty insurance? Or, are you still paying an ongoing monthly fee for a gym membership you no longer have time to use?
For example, assume you took our advice and found opportunities to save without sacrificing your current lifestyle:
Downgrade cable package: $25/monthly savings
Update property and casualty insurance with current/new insurer: $75/monthly savings
Cancel unused gym membership: $50/month savings
Total monthly savings: $150/month
It doesn’t sound like much, but $150 per month adds up to about $1,800 per year in savings. Assume you deposited your new found $150 every month into a Roth IRA – the $150 savings per month could accumulate to about $25,000 over 10 years assuming a 7% annualized return.
2) Review your Retirement Savings Plan
If you have not started saving for retirement – start small and get automated! By saving in smaller increments every pay period you can start building your nest egg for the future while minimizing the strain on cash flow.
Here is a summary of the following key retirement plan figures for 2016:
- Elective Deferrals: $18,000
- Catch-up Contribution (over age 50): $6,000
- 403(b)/ 457 Elective Deferrals: $18,000
- 403(b)/457 Catch-up Contribution (over age 50): $6,000
- SIMPLE IRA Employee Deferrals: $12,500
- SIMPLE Catch-up Deferral: $3,000
- Traditional IRA: $5,500
- Traditional IRA Catch-up: $1,000
- Roth IRA: $5,500
- Roth IRA Catch-up: $1,000
Here are a couple quick examples on how to max out your IRA or 401(k):
The max contribution in 2016 for your Traditional or Roth IRA is $5,500. You can max out your savings in 2016 by saving about $106 every week or about $459 every month!
The max contribution in 2016 for your 401(k) is $18,000. You can max out your savings in 2016 by saving about $750.00 every pay check if you get paid 24 times per year or about $693 if you get paid 26 times per year!
3) Check your Credit Score and Reports
If you have not been periodically monitoring your credit – you should start now. Why? By making sure your credit reports are accurate you can avoid the potential risk of being denied credit or denied the most favorable terms on a loan. Identity theft and cyber security have become a major concern and by periodically reviewing your credit report you can monitor for any suspicious activity.
Here are two FREE resources to help monitor your credit:
By clicking this link to the NAPFA (National Association of Personal Financial Advisors) website and following the instructions to create a free Credit.com account you can obtain a free Experian credit score, along with an estimated FICO and Vantage score. The reports are updated once every 30 days and you can log-in at any time to access your report.
The Fair Credit Reporting act made it mandatory for each national credit reporting agency, Equifax, Experian, and Transunion to provide you with a free copy of your credit report once every 12 months.
By clicking this link to the Federal Trade Commission website and following the instruction to create a free account at annualcreditreport.com you can obtain the three credit reports for free. Our recommendation is to obtain only one of the reports every four months so you can make sure you have constant monitoring throughout the year.
Like anything else the biggest hurdle to accomplishing anything is taking the first step – so start planning!