The New Year is upon us. Now, I know we have every intention of eating healthier and making use of the gym membership we signed up for at the beginning of 2014, but let’s be realistic. The gym membership that’s been sitting idle for 9-12 month of 2014 will most likely continue to sit idle in this New Year. On that note, instead of setting an unlikely goal to pump out a few reps at the gym, let’s actually start pumping out some dollar signs.
Being as youthful as we all are, who wants to talk about planning financially for the future, right? Well, if you think about it, there is no better time to ready yourself for what’s to come, than right here in the now.
Let’s begin with our debt. I mean how’d we ever eat our way into this much debt in the first place? Well, I’ll tell you. It’s not because we set a budget for ourselves, but rather the lack thereof. We need to trim the credit waistline! Take a look at your weekly/bi-monthly income. Now, take a gander at your expenses for the month. Scary, huh? When it’s all written down, it can be a bit overwhelming and might involve taking a new route in your everyday jog, but it’s great information. If you find that writing it all down is too tedious for you, try giving yourself a weekly or monthly allowance. You are going to find that many of the layers of expenses weighing you down in debt are attributable to splurging and/or personal expenses. It’s about that time to control it. Decide what is necessary and what you can do without. The last thing you want is to be spreading yourself thin. I mean, who wants to feel like their squeezing themselves into a pair of jeans that fit nearly a week ago?
So, what about that 401k? Yes, I know I said we were youthful, BUT shouldn’t we all prepare? Have you ever heard people say that they are pleasantly plump? Well, I’d like to be pleasantly fit…at least financially fit to retire. In the end, when my fingers can’t take typing on a keyboard anymore and my eyes tear on queue at the thought of looking at another computer screen, I do not want to worry about having to work a part-time job so that I can keep my home. Take advantage of your employer’s offer to match your contribution (I mean helloooo, it’s FREE money!). If your current employer doesn’t provide an employer match perk that doesn’t mean you should call it quits. Take advantage of the retirement plan you’re being offered. You are basically forcing yourself to put away money for YOU. Put as much of your paycheck towards retirement as you can (4-5% is a great start). If you haven’t the slightest clue where your retirement should be to be considered fit, there are plenty of personal trainers out there ready and willing to help. Get in contact with a financial advisor, so that you can develop a better idea of where your retirement savings need to be to support you.
Your employer many offer you some other great benefits to save you from paying those tax dollars, let’s take a look. Maybe the company you work for offers a flex spending account (FSA) or health savings account (HSA). These tax-sheltered accounts will help you save towards other costs you will encumber during the year 2015. FSAs allow you to put away money, pre-tax money that is, towards expenses like dependent care or health care. Just keep in mind that the money you put away will be lost if not used by year end. HSAs come in handy if you have a high-deductible health care plan and can be funded by you and/or your employer. This type of account allows persons with a high-deductible health plans to accumulate money unlike that of an FSA plan; if you don’t use up all the funds you’ve put aside during the year, no worries the funds will just get rolled over. The money you save in this type of account should be used for qualified healthcare expenses, but may be withdrawn for other expenses (at a cost that is). If you decide to withdraw money from the account for anything other than qualified medical expenses, you will be subject to taxes and, if under the age of 65, subject to penalties. However, keep in mind, this perk is yours. Yes, that’s right, you own it! So, should you leave your current employer, you would still have access to the account and the money it. Nice perks, huh? I guess Uncle Sam’s not too bad after all.
Oh, and after stuffing ourselves from Thanksgiving and on through the jolly December holidays, we should probably consider writing/updating our wills. That was clearly a joke. Who doesn’t love food? But, on a serious note, let’s talk about the inevitable. Wills are not exclusively for the rich; wills exist to dictate where your belongings go when you go. We need to make sure all of our unused gym equipment and other valuables get to the desired beneficiary. Though this may be a morbid topic for the beginning of a great New Year, seriously begin considering where all that is yours is going to end up in the event of your death.
Okay, now after all that sweat and tears, let’s move on to the happier parts of life… our savings! Yes, I know you are already putting away money for your retirement, but that’s for the future. We have to think about the present. How can you treat yourself and your loved ones (mostly yourself) without suffocating in your own debt? Well, it means putting YOU first when you receive that paycheck. Try and save between 5 and 10% of what you take home. If this seems like too much, or expenses weigh heavily than set a goal for your savings account. Then, establish a timeline and a strategy to conquer it. Whichever way you decide, put the money away in an interest-bearing account. I know, I know, what interest right? Well, hey, money is money! Plus, putting it in an account will prevent you from devouring it the minute you get your hands on it.
Hopefully, these few tips will help set you on the right track for 2015 and haven’t put a damper on your plans to hit the gym tonight. Be bold this year and take control of your future!
Sending you a happy, healthy, financially fit New Year!
Nicholle Mezier, CPA, MBA
Nicholle is a Manager of Cerini & Associates’ audit staff where she brings experience in audit, review, and consulting services to our general business, nonprofit and special education clients. Nicholle has worked with a large number of nonprofit clients, predominantly focusing on social service providers, healthcare providers, foundations, educational institutions, and arts and culture organizations. Nicholle’s technical knowledge allows her to provide specific services, including financial statement audits, internal and claims audits, and nonprofit outsourced accounting services. Nicholle has also contributed to the firm’s various newsletters.