With the New Year upon us, it is a wonderful opportunity to give our personal finance strategy a fresh review and make any necessary adjustments.
An annual review is an important step in meeting your retirement goals, reports the Investopedia.
Here are six ways you can review and improve your finances for 2016.
If you struggle with spending and budgeting problems, you are not alone.
Millions of Americans are struggling with credit card debt and other spending related stresses.
2016 can be your year to get on the road to financial freedom and end your spending problems once and for all.
You can take advantage of one of the free or paid online budgeting programs available.
Your credit report is like a transcript for your credit history.
Whether you never miss a payment due date or have a history of missed payments, banks will use that history to decide whether you get a new loan and for what interest rate you qualify.
An excellent credit score can save thousands on a mortgage or auto loan.
Over time, investment portfolio balancing changes as each investment rises and falls.
When this happens, your portfolio will drift away from the originally planned allocation strategy, and may need to be updated to get back in line with your goals.
To rebalance your portfolio, you can meet with a financial advisor or determine your own target asset allocation.
The above mentioned Personal Capital has free tools for this as well.
Take Advantage of Employer 401(k) Plan Matching
Many large employers today offer 401(k) matching to full-time, and sometimes even part-time, employees.
If you are eligible for 401(k) matching and you are not taking advantage, you are leaving free money behind that your employer is willing to pay into your retirement.
With the decline of defined benefit retirement plans, workers are increasingly required to be self-reliant in saving and investing for retirement.
As part of managing your own retirement, you will want to take every available dollar your employer will offer you for your 401(k) plan.
If you are not sure how to start, contact your company’s human resources department for instructions on enrolling and adjusting your contribution amount.
Now that you are taking advantage of any available 401(k) match, look at the bigger picture of your retirement savings.
Whether you only have an employer-sponsored 401(k) or have a more complex and self-directed retirement account like an Individual Retirement Account (IRA), you need to know that they are working for you and will meet your goals.
When working on your retirement planning, you first have to determine your needs in retirement and then create a plan to get there.
Experts suggest that most people will need about 80 per cent of their current salary in retirement to cover expenses.
For example, if you earn $50,000 per year at retirement, you will need about $40,000 per year during retirement.
Tax day in 2016 falls on Monday, April 18. With less than four months until taxes are due, start gathering your tax documents now to save yourself some time later on.
These are some of the most common forms to look out for:
W-2 – Income and withholding summary from employers
1099 – Other income including contract, interest and investment income
1098 – Common deductions including vehicle donations and student loan interest
It is a good idea to gather all of your tax documents in a folder as they arrive by mail or electronically.
That way you will have everything you need to complete your taxes on your own or an easy way to hand everything over to your professional accountant.
Much of your personal financial management, such as investing and bill payments, can be automated.
However, you should check in at least a few times each year to ensure your spending, investments and credit are all on track to meet your goals.
Everyone has different goals, so no two financial plans look alike.
By taking the time to fully understand your financial situation, develop your own goals and take action to meet those goals, you are setting yourself up for financial success in 2016 and beyond.