Happy New Year Get These Dates on Your 2011 Financial Calendar

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1 Happy New Year Get These Dates on Your 2011 Financial Calendar If you ve made a New Year s resolution to get control of your finances in 2011, here s a list of important planning and execution tasks that should be on your money calendar for the year: JANUARY: Set your credit report dates. You are entitled to one free credit report a year from each of the three credit reporting agencies: TransUnion, Experian, and Equifax. Each year, you should check each of your credit reports from It s wise to stagger the dates you check each report because irregularities might surface at different times of the year just split them over the course of the year. Think about college aid: In the next month, high school seniors will start hearing about early admissions to the schools of their choice. Start reading up on the Free Application for Federal Student Aid (FAFSA) for the upcoming school year (2011/12). Consult sites like FinAid for a thorough tutorial on the aid process. Start or review your emergency fund: Experts believe you should have 3-6 months worth of living expenses set aside. Set a fixed amount you ll save each month toward that goal. Check your investment accounts on your brokerage firm s or mutual fund companies websites and print off the Dec. 31 statements for the previous year. Review the earnings paid out to your account from interest, dividends, and both short-term and longterm capital gains. Use this information to begin organizing your 2010 taxes. Review your checking account statements and credit card statements for the previous year and tally your spending/expenses into categories. Compare your cash outflow to your cash inflow for each month of the previous year, and set target goals for spending in each category for the New Year based on your financial goals and values. If you want to make this process easier, consider buying a personal finance program for your computer. If possible, fund your IRA contributions as soon as possible in the New Year. Theoretically, this allows you to compound your returns and the benefits of tax deferral over the longest period possible. If you have a health savings account or a flexible spending plan through your employer before the end of the plan year, total the amount of expenses filed during the previous year and compare them to the total amount you contributed. Make sure you aren t contributing more than you are being reimbursed, because these are use it or lose it plans. FEBRUARY: Start pulling your tax information together: Your W2s and 1099s should be arriving get your records ready to start your return. MARCH: Get ready to fund your IRAs: April 18 will be 2011 s tax deadline, and that s the last date to make a 2010 tax-deductible contribution to your traditional and Roth IRAs. Plan to make the biggest affordable contribution you re allowed.

2 APRIL: Tax deadline: Monday, April 18 is the deadline for postmarking federal and state taxes. Education account contribution deadline: Don t forget that contributions to Coverdell accounts for the previous year are also due on tax day. Check your insurance coverage: If you have sufficient emergency funds, check to see if a higher deductible on home, auto or health insurance makes sense in terms of premiums savings and fewer potential claims. MAY: Talk to your parents: If you ve never discussed estate, health and long-term care planning with your parents, do it now. Do a summer energy checkup: Have your air conditioner checked to make sure it s working properly during the cooling season. JUNE: Do a mid-year financial checkup: Take the time to do a review of your tax planning, retirement savings, home, health and life insurance needs and do a mid-year check of your spending and emergency fund levels. JULY: Do a beneficiary check: Is the beneficiary information on all your investments, insurance policies and bank accounts up to date? Check your will: If you haven t checked your will in five years, see if your instructions are current. Make sure your powers of attorney reflect your intentions. AUGUST: Go over money issues with your college student: Whether they re freshmen or seniors, take some time to go over how they ll manage their money at school. Consider whether your salary or benefits are on target with your industry: Every year, it makes sense to do an assessment of where you are in your career, both financially and professionally. This way, you can start thinking about compensation issues well ahead of calendar-year budgets. SEPTEMBER: Order your last credit report: Get your third and final credit report of the year. Do a winter energy checkup: Have your furnace checked to make sure it is working properly during the heating season. OCTOBER: Be ready for open enrollment: Many companies set open enrollment for their benefits plans in September and October. Make sure you ve done some thinking about your benefit choices for the coming year.

3 Tax extension deadline: If you had to file for an extension on your federal taxes this year, your final deadline to file is Oct. 17. NOVEMBER: Total your potential tax losses: Confer with your tax adviser to see if it makes sense to sell stocks before the end of the year to balance out capital gains or losses in your portfolio or to carry forward losses for future use. Plan mutual fund sales before dividend distributions for less tax impact. Spend out your flexible savings account money: Check your employer s rules, but you should spend out the amount you put in your flexible spending account by Dec. 31 or the end of the plan year. Schedule any procedures or medical expenses you ll have by then. DECEMBER: Give: Make the charitable deductions you want to make for the end of the tax year. Also, remember single taxpayers can make financial gifts of up to $13,000. Pay deductable expenses early: To lessen your tax impact for the current year, pay mortgage interest or property tax installments early if your tax situation would benefit from it. See if alternating using standard deduction one year and itemizing the next -- called doubling up -- works for you January 2011 This column is produced by the Financial Planning Association (FPA ), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. Please credit FPA if you use all or part of this column. To connect with a member of FPA for your story, call FPA s Public Relations Department at , ext The Financial Planning Association (FPA ) is the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. FPA demonstrates and supports a professional commitment to education and a client-centered financial planning process. Based in Denver, Colo., FPA has 95 chapters throughout the country representing tens of thousands of members involved in all facets of providing financial planning services. Working in alliance with academic leaders, legislative and regulatory bodies, financial services firms and consumer interest organizations, FPA is the community that fosters the value of financial planning and advances the financial planning profession. For more information about FPA, visit or call

4 Creating Your First Budget Budgeting is one of the first great lessons of personal finance, yet relatively few people are taught the basics of creating one. Or if they re taught, they forget. The inability to measure how much money is coming in and how much is going out is a primary reason for financial illiteracy in this country. So it s a good idea to go over those basics. The Webster s definition for budget is simple: A plan for the coordination of resources and expenditures. A budget is both a noun and a verb a plan and a process. So it makes sense to go over the basic process of budgeting learning exactly what money is coming in to your life, what s going out and how effectively you re using the difference. The Income Column: Measuring what s coming in For most people, this is the easy part. Income is largely made up of the following categories wages, bonuses, investment income, alimony or other part-time income. Budgeting is easiest if done on a monthly basis. It s an easy time period with which to measure the inflow and outflow of money and it allows you to see over the course of a year which months tend to be better for income or spending. How should you record these amounts? Save all pay stubs and other proof of income. Photocopy checks before you deposit them and either build a physical file or start keeping track of income using computer software or online resources like Mint.com. The Expense Column: Measuring what s going out Why are expenses tougher? Because tracking every cent you spend can be tough when you ve never done it before. This process forces you to save receipts, credit card statements or to physically write down cash amounts in the absence of receipts. Recording and analyzing expenses are generally the most work-intensive part of budgeting, but there s a silver lining less spending means less recording time! What are the primary expense categories? Food, shelter and clothing. What s beyond that? All of your monthly bills. Retirement investments. College savings for your kids. Insurance costs. And everyone s favorite, taxes. And beyond that? Entertainment expenses movies, plays, vacations, sports, and of course one of the biggest money drains most people can t stand to give up, cable TV. How should you record these amounts? The same way you did in the income column. The upshot If your expenses match your income, congratulations. Relatively few people can say that, though the recent economic downturn has forced more people to cut debt and boost savings.

5 But if your expenses are still outrunning your income, you now know you have to start trimming and finding more money for savings, investment or debt reduction. What should your target be? There are a variety of theories, but you will often hear the term 60 percent solution. This means aiming for a total spending figure equal to the first 60 percent of your income. How do you get there? Start by identifying the expenses you can live without designer coffee, restaurant meals and carryout might be a start. Then start finding ways to whittle down monthly bills paying more than the minimums on credit card bills, consolidating other debt with lowerrate offers if you can find them. If you can refinance your mortgage affordably, that s another good way to attack the spending side of your budget. And what do you do with that extra money? First, make sure you have an emergency fund that contains 3-6 months of money to cover living expenses. Then start putting money away for retirement. After that, money for the kids college fund. Beyond that, extras like vacations, entertainment and other treats. If this approach seems a bit Spartan, it s a good starting point indeed, every individual defines the term financial essentials a bit differently. But it s important to start prioritizing financial issues correctly. For help, it makes sense to consult a professional like a qualified financial planner and a tax expert to identify ways to save and tip more money into a solid financial future. And for a look at budgeting tools that won t cost you money, go to Mint.com January 2011 This column is produced by the Financial Planning Association (FPA ), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. Please credit FPA if you use all or part of this column. To connect with a member of FPA for your story, call FPA s Public Relations Department at , ext The Financial Planning Association (FPA ) is the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. FPA demonstrates and supports a professional commitment to education and a client-centered financial planning process. Based in Denver, Colo., FPA has 95 chapters throughout the country representing tens of thousands of members involved in all facets of providing financial planning services. Working in alliance with academic leaders, legislative and regulatory bodies, financial services firms and consumer interest organizations, FPA is the community that fosters the value of financial planning and advances the financial planning profession. For more information about FPA, visit or call

6 New Federal Consumer Protection Rules Went Into Effect Jan. 1 What You Should Know On Jan. 1, new federal consumer protections went into effect on issues ranging from transparency on credit reports to safeguards against identity theft. The provisions affecting credit reporting are actually the result of a law passed seven years ago the Fair and Accurate Credit Transactions Act of The law requires lenders to tell consumers when negative information is going to result in higher rates and fees for mortgages, credit cards and other loans. This is known as a risk-based pricing notice a piece of information that surfaces early in the loan process to allow consumers to make corrections on their credit data that could lead to better pricing. Consumers who receive these notices can obtain one free credit report to verify the accuracy of the notice. Also on Jan. 1, the Federal Trade Commission started enforcing rules to require businesses that handle credit to adopt written plans to identity, detect, monitor and respond to potential cases of identity theft. Called the Red Flags rule, it affects traditional banks or thrifts, but also creditgranting organizations like auto dealers. But until the Consumer Financial Protection Bureau opens in July, consumers should reacquaint themselves with rules affecting their credit reports and scores. In the meantime, there are some good rules of thumb to follow in improving one s chance for credit, according to the Fed: Pay your bills on time: If you ve paid bills late, had an account referred to a collection agency or declared bankruptcy, this history will ding you. Get your debt levels down: Most scoring models downgrade your credit score if your accounts are close to your credit limit. Aim for a score of 700 or better: Many banks consider their most desirable customers to have credit scores of as much as 730 or more to get the best rates. How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances. Don t overapply for credit: If you have applied for too many new accounts recently, that may negatively affect your score. However, either you or outsiders checking your credit reports or scores won t affect this because they re not applications for credit. Note your mix of credit: Many credit-scoring models rank customers lower when they have too many finance company accounts or credit cards. Get all your non-deductible debt to under 50 percent of your credit line in each account. Go after your balances with the highest interest rates first, and once you hit 50 percent...keep trying and get those balances down further.

7 Start budgeting: If you ve never reviewed your spending and picked out areas where you can cut, you ve never done a budget. Start tracking your spending either on paper or with financial planning software and start pinpointing what spending you can shift over to paying off debt. Get some advice: You might be focused on pulling together a down payment, but it might not be a bad time to sit down with a tax professional or a financial adviser to talk about the way you're going to manage your debt going forward. Keep an eye on your credit reports: Remember that you have the right to get all three of your credit reports -- from Experian, TransUnion and Equifax -- once a year for free. You can do so by ordering them at Don't order all three of them at the same time, though. By staggering receipt of each of your credit reports, you'll get a continuous picture of how your credit picture looks because the three bureaus feed each other the latest information. You ll also be able to clean up errors as you find them -- errors can drag down a credit score and you ll also keep an eye on identity theft. Oh, and by the way, keep in mind that all free credit report sites are not free if they ask you for a credit card number, remember they re doing that because they want to charge you. Just go to the site above and you ll be fine. Once you ve paid it all off, don t close the account: In the world of credit scoring, closing accounts (even those that have not had balances for years) is a lousy idea. Lenders want to see a long record of credit management, and longtime accounts that you haven't touched in years may actually help your score because it shows you have some restraint January 2011 This column is produced by the Financial Planning Association (FPA ), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. Please credit FPA if you use all or part of this column. To connect with a member of FPA for your story, call FPA s Public Relations Department at , ext The Financial Planning Association (FPA ) is the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning. FPA demonstrates and supports a professional commitment to education and a client-centered financial planning process. Based in Denver, Colo., FPA has 95 chapters throughout the country representing tens of thousands of members involved in all facets of providing financial planning services. Working in alliance with academic leaders, legislative and regulatory bodies, financial services firms and consumer interest organizations, FPA is the community that fosters the value of financial planning and advances the financial planning profession. For more information about FPA, visit or call