What is a Good Game Plan to Improve My Finances in 2008?

Paying off debt and saving money are among the most popular New Year’s resolutions. And the Illinois CPA Society has some helpful tips for those who want to meet to meet their financial objectives in the coming months.

HAVE A PLAN

People often to fail to keep their New Year’s resolutions because they don’t plan out the steps they need to take to succeed. It’s difficult to reach your goals if they aren’t clearly defined. Take the time to list your financial resolutions and be as specific as possible about what they are and how they can be achieved.

CREATE A BUDGET

It will be difficult to lower your debt or save for the future if you do not have a clear idea of your current finances and how you’re spending money. Make a list of what you spend and what you earn. In the spending category, include regular items such as rent, car payments, utilities and outstanding loans. Next make accurate estimates about your variable expenses such as food, transportation, entertainment and clothing.

LOOK FOR RED FLAGS

Now that you have listed what you spend each month, consider problem areas. Do you have a high-interest loan or credit card balance? Are you spending a lot each on take out meals and entertainment. Think about whether you can make better choices. If you change you bad spending habits or poor choices, you can preserve your cash and spend it more wisely.

PAY OFF DEBTS

When you make your resolutions list, CPAs advise that lowering your outstanding credit card debt should be a top priority. Credit cards typically carry high interest rates that drain cash that you could be using for more worthwhile purposes. To reduce your debt, resolve to cut back on other expenditures so that you can use these funds for credit card bill payments. Also, consider ways to lower the interest rates you are paying. Call your credit card company and see if you can negotiate a better rate. If that doesn’t work, transfer your balance to a credit card with a lower rate. Web sites like www.bankrate.com & www.creditratings.com offer advice on the best cards for many different situations.

Finally, if you have money in a savings account or certificate of deposit that is earning very low interest, it might be a good idea to use those funds to pay off debt. You will be saving more on interest payments than you earned on the savings account.

SET REALISTIC TARGETS

Paying off all your debt is an excellent goal, but it may not be something you can accomplish this year. That’s no reason to give up, however. You can make great progress if you set reasonable targets that are achievable and that will make a difference in your financial life.

START SAVING

As soon as you have reduced your high-rate debt, start adding to your savings, particularly your retirement account. The money you set aside can be earning interest or stock market returns that will come in handy later. Traditional individual retirement accounts or Roth IRAs also offer worthwhile tax advantages, CPAs advise. And this step is easy if you arrange for automatic payments made to a savings or retirement account from your checking account.

MAKE THE MOST OF YOUR INVESTMENTS

It’s a good idea to review all your investments every six months to be sure they are still meeting your financial planning needs. If interest rates have risen recently, for example, you may find certificates of deposit or other safe, short-term investments that will pay more interest than your savings account. Review your stocks and mutual funds, too, to see if they are performing as expected or if another investment would provide a better return.

KEEP GREAT RECORDS

You can’t make good financial decisions without the right information, so it’s important to maintain and update documentation on your major accounts and transactions. Set aside a file box and add important paperwork, such as your property tax bills, mortgage interest statements and receipts for donations to charity. And remember that your CPA can help you with your financial decision-making. Consult him or her on the best ways to keep all your financial resolutions. This information was brought to you by the Illinois CPA Society.