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11 Top Financial Planning Tips for the Rest of 2011


How are you faring financially so far in 2011? Now is a good time to assess your situation and consider changes. Consider these 11 tips . . .

  1. Spend only what you can afford. It seems simplistic, but many people, even those with substantial incomes, ignore this basic financial principle. If you have more money going out than you have coming in, itís a recipe for eventual disaster. To get things in balance may require trimming your spending or earning more. Are you being paid what youíre worth? Can you get an additional, part-time job? Do you have entrepreneurial ideas that could bring in extra income? Making a few thousand dollars more each year could add up to a significant sum over your lifetime.
  2. Make a budget and stick to it. This tip dovetails with the previous one. Regardless of how much you earn, itís important to know what youíre spending and where the money goes. Track your expenses by keeping credit card receipts and noting cash payments. You may be surprised at how much you spend on certain items and monitoring your outlays could help you find easy ways to economize.
  3. Avoid mounting credit card debt. One of the worst financial traps is to make large purchases on credit and then fail to pay off the full amount each month. Despite recent legislation to reform rules on credit cards, your issuer can still impose double-digit interest rate charges on unpaid balances, sending your debt higher and higher and making it increasingly difficult to retire. If you have a large balance or two, consider consolidating your debt and putting away your plastic until you catch up.
  4. Pay yourself first. This idea also needs to be coordinated with previous tips. But the main point is to set aside perhaps 5% to 10% of your income on a regular basisóbefore it gets spent. It may help to have the money automatically deducted from your paycheck and deposited into a separate account.
  5. Invest your savings. Itís not enough just to save money; you also have to put it to work for you. Itís important to have an investment plan that considers your savings goals, when youíll need the moneyófor your kidsí education, your retirement, or another objectiveóand how much investment risk youíre comfortable taking. A good advisor can help you devise and implement an effective portfolio strategy.
  6. Maximize employment benefits. Taking advantage of on-the-job benefits such as employer-sponsored health, dental, and life insurance could mean substantial savings. If your company offers flexible spending accounts, you can arrange to use pre-tax dollars to pay for unreimbursed medical or dental expensesóand save as much as a third on those outlays.
  7. Salt away money in retirement plans. Most employers let you participate in a 401(k) plan or another tax-favored retirement account. With a 401(k), you can defer part of your salary on a pre-tax basis to your investment account, and your company may match a portion of your contribution. Outside of work, both traditional and Roth IRAs can also help you build your retirement nest egg.
  8. Convert to a Roth IRA. One downside to traditional tax-deferred retirement accounts is that youíll be taxed on distributions at a time when you may need all the income you can get. A Roth IRA, in contrast, doesnít let you deduct contributions but can deliver tax-free payments in your 60s, 70s, and beyond. You can convert traditional plans to a Roth, paying tax on the converted amount now to avoid liability during retirement. And because a Roth IRA doesnít require withdrawals, youíll have the option of preserving the account to pass along tax-free income to your heirs.
  9. Review insurance policies. Donít make the mistake of being under or over-insured. For most people, the need for life and disability insurance is greatest during peak earning years and when there are children at home. But youíll need adequate insurance coverage even during retirement.
  10. Create or revise your will. Your will is the road map to your estate plan, and if you donít have one, creating one is an absolute necessity. And an existing will may need to be updated, especially in light of the generous $5 million estate tax exemption ($10 million for married couples) available for 2011 and 2012. Itís also important to have a power of attorney document drawn up in case you are unable to manage your own finances.
  11. Get organized. Finally, make sure to keep accurate records and know where they are located. Developing a system for monitoring your finances should prove helpful for years to come.

This article was written by a professional financial journalist for Mosaic Financial Partners, Inc. and is not intended as legal or investment advice.


Mosaic Financial Partners offers you a personalized, creative approach with expert advice to help you meet your Financial Planning and Investment Management goals. With offices in San Francisco and Lafayette, Mosaic Financial Partners can be reached by email at [email protected] or visit their website at www.mosaicfp.com.

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