Need Some Ideas to Improve Your Finances for 2012?
Are you looking for ideas to improve your finances during 2012? Read about seven financial steps that will dramatically help you stay on the path of financial success. 1. The first step is to commit to saving regularly. It is important to establish a habit of continually putting away a specific amount of money into an interest bearing account. Before paying bills and other financial obligations, set aside an affordable amount each month in accounts designated for long-term goals and unexpected emergencies. The key to success in this step is to not dip into these accounts unless the money is used for set goals or emergencies. 2. Secondly, take advantage of higher contribution limits for both individual retirements accounts (IRAs) and tax-deferred employer retirement plans such as 401(k)s. These higher limits are available to all employees with earned income regardless of age. In addition, there is a special catch-up provision for people age 50 and older. The maximum contribution for IRAs (Roth or Traditional) is $3,000 + $500 catch-up, totaling to $3,500. The maximum contribution to tax-deferred employer plans is $13,000 + $3,000 catch-up, totaling to $16,000. 3. The third step is to maintain a low debt-to-income ratio. Monthly consumer debt payments should be 15% or less of monthly take-home pay. For example, $300 of debt payments divided by $2,500 of net pay equals a consumer debt-to-income ratio of 12%. (300 divided by 2,500). 4. Make sure you accumulate an emergency fund of at least three month’s expenses. Keep this money liquid in cash equivalents such as a money market or a short-term CD. It may take months to a year to accumulate an adequate reserve, but do not fret this is normal. The main thing is to start now and save regularly to accomplish this goal. 5. Increase your personal financial literacy. The more financial knowledge you gain, the more successful you will be at managing your money. Expanding your financial knowledge lessens your risk of making costly financial errors.
