“The best way to save toward a specific goal is to set up a system you don’t have to think about,” says Klisiwecz. Have your bank automatically transfer money from your checking account into a savings or investment account after each pay period. If you don’t see the money, you won’t have the urge to spend it. “Most people can adapt to whatever income comes through the door,” says Klisiwecz. “By automatically transferring money into savings, you’re forcing yourself to live on a little less.”
Increase Your Financial IQ
Get smart about money by educating yourself through articles, books, seminars and websites. Focus on your goals, and find out if there are any benefits available to you that you might not be taking advantage of. “Talking to your employer is a great place to start,” says Todd Minear, an independent certified financial planner with Open Road Wealth Management in Kansas City, Mo. “Find out how the 401(k) plan works, and ask about a Health Savings Account (HSA), which can be triple tax-exempt.”
Cut Out Unnecessary Fees
Checking accounts, ATMs and credit cards may come with hidden fees that can add up over time. “The key is awareness,” says Klisiwecz. “Take a close look at your financial statements to see where your money is going.” Avoid withdrawing money from ATMs that charge a transaction fee, switch to a bank that has no minimum-balance requirement, and cancel credit cards that charge an annual membership fee. What about late-payment or overdraft fees? “These are symptoms of being overextended or not paying attention to your money,” says Klisiwecz. Get organized by setting up automated payments as much as you can, so you don’t fall behind. For a little help to stay on track, use online tools or apps that send you alerts when you hit designated limits.
Get Smart About Retirement
Take advantage of your company’s 401(k) retirement savings plan if you haven’t already. And if there’s a company match, contribute enough to secure it—typically 3 percent of your income. “The company match is like getting free money,” says Minear. Consider increasing your contribution each year by 1 percent if you can, he suggests. If you don’t have a 401(k) plan, consider opening an IRA or Roth IRA—or a SEP IRA if you’re self-employed—and contribute as close as you can to the maximum allowed by the IRS.
Protect Your Assets
Calculate your net worth, and take steps to protect assets like your home. “Taking inventory is like stepping on the scale,” says Klisiwecz. “It lets you see how you’re doing.” Make sure you have the right insurance in place—whether it’s renters, homeowners or life insurance or a personal umbrella policy. “Take a home inventory by making a video tour of your house,” suggests Minear. “If you have a fire or theft, you’ll be able to prove what you have.” Protect your online accounts by having strong passwords, and back up electronic information on an external hard drive that you store in a fireproof box.
While the new year is always a good time to step back and reassess, “any time is good for taking charge of your financial future,” says Minear. “The sooner you can get started, the better.”
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