Be cautious about setting too many or unrealistic financial goals, as you plan for 2014. Otherwise, you may be unable to accomplish any of them. Mark Lamkin from Lamkin Wealth Services says take this opportunity to restate your financial resolutions simply and clearly for the New Year. It may be a good idea to maintain a checklist to keep track of how you are doing throughout the year, so that you can make any necessary modifications.
1. High Interest Debt
All debt is NOT equal. Make a list of your debts and organize them by the annual interest rate. Those with the highest rates (most likely your credit card debt) should be paid off immediately. It does no good to invest money while you are paying 19%+ each year. In a lot of cases, the wisest course of action is to sell any certificate of deposits, savings bonds or other cash holdings and use them to pay the balance. Why? If you owe $10,000 on your credit card and pay 19% interest annually ($1,900 per year), while at the same time, own a $10,000 certificate of deposit at a bank, paying you 4% interest ($400 a year), you would actually save yourself $1,500 a year by paying the debt!
2. Credit Report
Review your credit report, and take steps to repair any negative aspects. Now that you're entitled to three free credit reports each year, there is no excuse for not reviewing what is one of your most important financial reports, especially since errors in these reports are not uncommon. That said, obtaining a truly free credit report isn't as easy as some companies claim, so be sure you know all the terms and conditions before requesting a report.I just went to free credit report.com and had a good experience.
3. Push the limits
Max out your 401(k). Most workers can contribute up to $17,500 to a 401(k), 403(b) or the federal government's Thrift Savings Plan in 2014. To max out this type of retirement account, you would need to contribute $1,458 per month or $729 per paycheck if you are paid twice per month. Workers age 50 and older can contribute an additional $5,500 to their 401(k) in 2014, or a total of $23,000. If you have a company match, I think it's always a good idea to start there, Lamkin says. The most common 401(k) match is 50 cents per dollar contributed up to 6 percent of pay. You can contribute up to $5,500 to an IRA in 2014, which jumps to $6,500 if you are age 50 or older. To max out this type of account over the course of the year, you would need to contribute $458 per month, or $542 monthly, if you are age 50 or older
4. Retirement plan
A major financial-planning mistake many people make is not having true alignment with their short-term goals, such as improving bad habits, and their ultimate financial goal: retirement. For example, saving money every month by cutting out an unnecessary expense can definitely have a positive effect on financial stability, but it should also be tied to a larger savings goal (like increasing their 401(k) contributions). This is especially true for boomers who have to ensure they have enough assets for a retirement period that could last 25-30 years or longer. With longer life expectancies than ever before, boomers need to make sure their money lasts as long as they do
5. Tax Plan
Last years New Year's Day compromise on the fiscal cliff was designed to prevent massive tax increases from taking effect that many feared would devastate the economy. When filing taxes this year, you will see the results. Yet even with the compromise, several new taxes in 2013 will raise tax bills for millions of Americans, and the groups that are the most affected by the changing of the calendar may surprise you. Payroll Taxes, high income earners are Returning to Old Levels, Medicare Surcharge, New Tax Brackets and Rates for High-Income Earners, Disappearing Deductions and Other Hidden Taxes.
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