Jeanette A. Tucker, Bogren, Richard C. | 12/9/2006 3:53:15 AM
Many New Year’s resolutions are long forgotten by the first of February. However, resolving to take control of your family finances can have a positive effect on your financial position in the coming months and on your long-term goals, according to LSU AgCenter family economist Dr. Jeanette Tucker.
Tucker suggests including a New Year’s resolution to organize your family finances this year by:
-- Determining your net worth. List your total assets, including mutual funds, savings, cash value of life insurance, valuables and the value of your home’s equity. Then subtract estimated liabilities, such as your mortgage, car loans, credit card balances and other consumer debt. The amount you come up with is your net worth.
-- Developing a budget. Begin by recording every expenditure you make for one month, including monthly bills, large purchases and daily expenses, such as soft drinks, candy and similar items. "This gives you a clear picture of where your money goes," she says. "Then, look for areas where you can cut expenses. Spend wisely and control spontaneous spending."
-- Paying off credit card debt, or as much debt as you can. Always try to make the largest payment you can on credit card bills–not just the minimum payment. Apply extra payments to the bill with the highest interest rate. "If you have extra money because of a bonus or a gift, put at least half of the total toward an extra payment on your debt to accelerate payoff," Tucker suggests.
-- Setting aside an emergency fund. Experts suggest setting aside at least three months’ take-home pay for emergencies before building a savings plan. This allows you to dip into the emergency account when an unexpected expense or emergency arises.
-- Planning for retirement. The money you save early earns the most for you because of the principles of compound interest. People who begin a retirement account in their 20s will have far more saved than people who start in their 40s. If your workplace has a 401(k) plan, you avoid paying taxes on any money saved until it is withdrawn. Some employers match what you put into a 401(k) plan.
-- Spending wisely. One way to save money is to comparison shop. Plan the time of major purchases when sales are taking place.
-- Making a will. A will allows you to decide how your assets will be split after your death, including who will have custody of your children.
-- Reviewing your insurance coverage. Consider saving on your payments by raising deductibles. You may want to consider term life insurance, which is much less expensive than policies that have a cash value.
-- Checking your credit report. Study the report carefully to make sure that all information and numbers are correct. Have any errors or omissions corrected.
"Keep up with the details," Tucker advises. "Balance your checkbook every month. Look at advertisements to get the best deals at the grocery store. Take a look at your bank fees to see if there are ways to reduce what you are paying. Check long distance calling plans with different carriers to find the best rates.
"Teach your children how to manage their money, so they can begin to create a successful financial future," she adds. "By starting now, by the time they reach adulthood, they will possess the skills and habits necessary for financial stability."