How to Stay Financially Fit ~~
- Dee Pel
- Feb 14, 2015
- 4 min read
How to Stay Financially Fit :
Any fitness guru will tell you that the key to maintaining your health and staying fit is maintaining healthy habits and making small lifestyle changes that, when added together, can make a big difference. The same is true when it comes to maintaining your financial health.
For me -- whether I'm focused on improving my health or my finances -- it's all about goals. There's no greater motivator and planning tool than to set a goal and build a plan to achieve it. I see that come to life every day with the people we serve across all age groups. In fact, our recent survey of millennials found that those who set goals seem to be good at reaching them: Of the 41 percent of respondents who set savings goals, 65 percent said they normally achieve them.
As 2015 gets underway, it's a perfect time to take a fresh look at your financial fitness and make some resolutions for getting your financial life into better shape -- both for the short and long term. Here are seven steps you can take to stay financially fit in 2015 and for many years to come.
(1) Understand your assets and liabilities. Just like successful businesses, individuals need a strong balance sheet to achieve financial success. It's a good idea to make a list of the assets you own and the liabilities you owe so that you see your full financial picture. Personal assets include cash, savings, stocks, bonds, retirement accounts, real estate and anything else of value. Liabilities include any of your debts, including a mortgage, student loans, auto loans, outstanding bills and credit-card debt.
(2) Assess your goals. Effective goal-setting depends on establishing a goal that while challenging, is within reach. Think about your short-, medium-, and long-term goals. Short-term objectives, such as paying off a credit-card bill, will change more frequently than long-term goals, such as saving for retirement. You may want to reevaluate your long-term goals each year and your shorter-term goals every three to six months.
(3) Check your credit report. Your credit report contains all of your important financial information: what accounts you have open, what types of credit you have and how reliable you are in paying your bills. Each year, you are entitled to request a free credit report from one of the three government-approved credit reporting agencies: Experian, Equifax and TransUnion.
Your credit report is particularly important if you're planning to make a big purchase in the near future. If you need a loan to buy a car, or a mortgage to buy a house, then you will need a strong, clean credit report and a high credit score. According tomyFICO.com, a score of 680 or higher would generally be considered good, and the national average hovers at around 692. Here are some tips for how to boost your credit score or maintain a healthy one.
(4) Name your beneficiaries. Obtaining an insurance policy or starting a retirement account often requires that you designate at least one beneficiary as the person who collects from these accounts in the event of your death. While most people select a spouse or close family member, certain life events may alter your choice. A marriage, divorce, death, or birth of a child may mean you want to name new beneficiaries. Even if you haven't experienced a major life change recently, it's still wise to review your beneficiaries every year.
(5) Plan for your taxes. More thought should go into your taxes than simply meeting the April 15 tax-filing deadline. Paying taxes takes a bit of advance planning. For starters, you may want to ensure that your employer is withholding enough of your paycheck to cover your tax obligations. At the same time, remember that several factors affect the amount of federal income tax you pay in any given year. For instance, if you donate sizable amounts to charities, you may opt to itemize your deductions instead of taking the standard deduction. For more guidance on managing your taxes, check out this video on calculating tax deductions.
(6) Evaluate your long-term financial plans. An important component of many people's long-term goals is planning for retirement. One item you should evaluate is if you are making the most out of your employer-sponsored 401(k), which can be one of the biggest potential benefits your workplace offers. This plan allows you to contribute part of your income to a 401(k) investment account before taxes are taken out. Plus, according to a 2014 TransAmerica Center for Retirement Studies survey, more than 75 percent of companies who offer a 401(k) provide a company match. This means that depending on how much you contribute to your 401(k) each year, your employer may also contribute a matching percentage to help build your account balance. Keep in mind that a 401(k) is like any investment account; you could earn or lose money depending on how well the investment performs over time. And while you contribute pre-tax and that contribution grows tax-deferred, your contributions and any earnings will generally be taxed when you withdraw funds from the account.
(7) Determine if you have the right insurance. Depending on the makeup of your assets, you may want to consider insuring some of them. Renters may think about renters' insurance, while those who own a home should have homeowners' insurance. If you own jewelry or other valuable possessions, perhaps you need specialized coverage. The easiest way to determine whether the insurance you have meets your needs is to speak with your insurance agent.
Getting your waistline or your wallet into better shape can be a challenge, but it's a lot easier to achieve if you have a clear plan to follow. If getting into financial shape is one of your new year's resolutions, these tips from BetterMoneyHabits.com will help get you there.
Neither Bank of America nor any of its affiliates provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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The material provided is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damages resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.
