By Daisy Whitney
If you’re like most people, chances are you want to get your financial house in better shape. But getting started can be daunting. Here are some tips on financial software, online banking and bill paying, investing for retirement, saving for college, and assessing your insurance needs.
Financial Software: Everyone has a friend who uses Quicken or Microsoft Money and says “You have to get it.” Now, you finally agree that it’s time. The benefit of such a software program is that it can help you track where you are spending money, said David S. Dryden, a certified financial planner and expert in money management programs in Plano, Texas. “If they track their money they can make better decisions going forward to make sure they aren’t spending money unnecessarily,” he said. Both programs use categories for what you spend, like groceries, mortgage and utilities. Tracking your expenses helps you account for where your money is going.
Be prepared to spend at least three to four hours to plug in the data the first time you use such a program, said Terri Cullen, personal finance columnist for the WSJ.com. After that, a money management program is fairly automatic, especially if you choose to download your credit card statements and bank statements into the program.
Online Bill Paying and Banking: Most banks now allow you to access your account on the Internet, meaning you don’t have to wait for monthly statements to verify charges. You can also transfer money between accounts online. Online bill paying takes online banking another step. With a service like Quicken Bill Pay, when you write the “electronic” check the bank receives a notification to send a check to the phone company or to Sears, for instance. “It recognizes it as an electronic payment,” Dryden said.
Bear in mind, Cullen said, that online bill paying is not completely electronic. “You don’t push a button and it magically appears,” she said. In most cases, the bank actually writes the check and sends it. While that saves you the cost of paying for a stamp and the time in writing a check, there may still be a lag in the payee receiving it. That’s why important bills, like the mortgage, should be set up for automatic withdrawal, she said.
Retirement Planning: The best way to save for retirement is if you have access to a 401K to contribute at least enough to meet an employer match, Cullen said. Try to contribute at least 10 percent of your income if you are in your 20s, 30s, or 40s because of how money compounds, she said.
If you start at age 25 and contribute the $14,000 maximum each year, you would have nearly $4 million by age 65, said John Demming, a spokesperson for Vanguard. If you start saving in your 401K at age 40, you would have just over $1 million, he said.
Several web sites like www.Smartmoney.com and www.Morningstar.com have online software and free calculators to help determine how much you need to contribute to meet your retirement goals. Have all your paperwork together before you use them, like tax returns, statements and bank balances.
If you are self-employed or don’t have access to a 401K, you can establish retirement accounts through no-load, low-free mutual funds like TIAA-CREF, Vanguard and Fidelity, Cullen said. “They have funds that are built for your age, so investing in one fund you pretty much cover the gamut,” she said.
Saving for College: A 529 plan is an investment vehicle operated by a state or educational institution to help save money for college. The plans aren’t just for public universities; the money can be transferred to private and out-of-state schools. For more information on 529 plans, check out www.savingforcollege.com , Cullen said. Savings bonds and mutual funds are other options, Dryden said.
Keep in mind that Congress will need to reenact the law in 2010 to maintain the tax benefits of these plans, Cullen said.
Insurance Needs: An insurance review with your insurance agent at the start of the year is a wise idea, Dryden said. Most people have home owners or renter’s insurance as well as auto. But life, long-term care and disability insurance are important too. If you have children dependent on your income, you need life insurance, he said. Most people need more disability insurance as well.
“Probably the biggest exposure I see is people are underinsured for disability,” Dryden said. Some people are covered through work, but usually don’t have enough, he said. “Get as much as you can qualify for,” he said. You may want to opt for long-term care insurance, which covers nursing home and home-help needs, for instance, he said.
|INFORMATIONAL DISCLAIMER The information contained on or provided through this site is intended for general consumer understanding and education only and is not intended to be and is not a substitute for professional financial or accounting advice. Always seek the advice of your accountant or other qualified personal finance advisor for answers to any related questions you may have. Use of this site and any information contained on or provided through this site is at your own risk and any information contained on or provided through this site is provided on an "as is" basis without any representations or warranties.|