New Year’s financial resolutions

It’s the time of year for popping champagne corks, tossing confetti, and making New Year’s resolutions. And many of those resolutions are likely to focus on better financial management. The New York Society of CPAs offers the following suggestions to help you get your money matters in order.

Pay off holiday debt quickly.
Try to wipe clean your credit slate. Add up how much you owe on each of your credit cards. Then create a plan for paying off your debt, starting with the credit card with the highest interest rate. In addition, call each of your credit card issuers and try to negotiate a lower rate. Going forward, resolve to make all purchases with cash or a debit card to ensure that you spend only the amount you have.

Save. save. save.
Make saving a priority and pay yourself first. Don’t wait until all your bills are paid and you end up neglecting your savings. Most banks and investment companies have processes that enable money to be deposited directly from your paycheck or checking account into a savings or investment account.
Next, pick two or three spending categories - entertainment and clothing for instance - and try to trim 15 or 20 percent from the amount you typically spend. Divert this money to your savings and you’ll be surprised how quickly your balance grows.

Review your insurance policies.
You should look over your homeowner’s insurance at the start of each year to determine whether your policy amounts are keeping pace with the increased value of your home. Do the same with your life and disability insurance to ensure that you have sufficient coverage.

Boost your retirement savings.
When it comes to investing for retirement, it’s never too late, or too early to start. For 2007, you can contribute up to $15,500 to your 401(k) plan at work-$21, 000 if you’re age 50 or older. If you can't afford to put that much aside, make every effort to contribute at least enough to qualify for the full company match. If you don’t have a retirement plan at work, consider opening an IRA, Roth IRA, or SEP plan.

Check your asset allocation.
Rebalancing is an essential part of managing a portfolio, and the beginning of the year is an opportune time to compare your current asset allocation to your target allocation. If any of your asset classes move off target by 5 to 10 percent, take steps to rebalance your portfolio.

Make a will.
Start off 2007 by resolving to create a will, if you don’t already have one. A will ensures that your personal belongings and assets will go to the beneficiaries you choose. If you have children, a will also allows you to appoint a guardian to care for them in the event of your death. Without a will, that decision may be left to the courts.

Make tax planning a year-round activity.
While some tax-saving activities can be executed at year-end, others require time and planning. Examples include offsetting investment gains with losses, shifting income, and restructuring your debt to take advantage of tax-favored borrowing, and maximizing your itemized deductions.

Organize your financial records.
Organizing your financial and family records can save you time, money, and trouble. Sort through the paperwork you’ve been collecting and move important permanent records such as birth certificates, wills, property deeds, and trust agreements to a secure fireproof location off your premises. Other records can be organized within a file cabinet or whatever system works for you. Just be sure that your family members know where all your important paperwork is stored.

Work with a CPA to create a financial plan.
A comprehensive financial plan is a key tool for managing your finances. A written plan motivates you to achieve your financial goals, provides direction, and offers a benchmark for measuring your progress. A CPA can help you establish or update your plan.