I’ve never been a big fan of New Year’s resolutions but I do believe in taking some solid steps to secure your financial life at the beginning of each year. Today, PF Pro contributor, Melissa Hoffman, takes a look at 5 financial tune-ups that you should complete ASAP.
It’s the start of the new year, which means new resolutions! However, before we jump into 2015 too quickly, it’s important to make some financial tune-ups. Here are the top 5 financial tune-ups to make in January to set yourself up for financial success in 2015.
Financial Tune-Up 1: Check your annual credit report
If you haven’t checked your credit report recently, visit annualcreditreport.com and grab at least one of your credit reports. You can get a report from Experian, TransUnion, or Equifax.
You may as well grab all three at once, especially if you’re apt to forget to check your score later in the year. The three reporting agencies all differ in little ways, so it’s a good idea to get them all and evaluate your credit score overall.
Around 25% of people find an inconsistency on their reports, and that can negatively affect how you are viewed for credit cards, home and auto loans, and more. By checking your credit score early on in the year, while your motivation is still high, you can tackle any issues on your report and go into 2015 knowing if you need to improve or simply maintain the score you currently have.
Financial Tune-Up 2: Shop around for new insurance
If you’re within a few months of renewing your current auto or homeowner’s insurance policies, now is a good time to shop around and see if you can’t do better elsewhere.
If you’ve stuck with the same insurer, over time your loyalty could end up costing you money. Nerdwallet did some research on auto insurance and found that US drivers overpay on auto insurance by an average of $368 each year. US drivers who shopped around saved an average of 32% on their auto insurance.
Shopping around for insurance can be a pain, which is why the majority of consumers stick with their insurers for a while. However, there are some ways you can price shop efficiently, without spending hours on the phone or filling out multiple forms.
Some credit unions offer services to help you find cheaper rates on home and auto insurance. Call or visit your credit union (either physically or online) for more information. The catch is you have to be affiliated with a credit union, and you’ll need to go through the process annually if you want to shop around next year for cheaper prices.
If you don’t use a credit union, you can search online for cheaper auto and home insurance rates. Use this tool from NerdWallet.com to search for auto insurance quotes. If you find an auto insurance quote cheaper than your current plan, call the provider and ask if they provide discounts for bundling home and auto insurance (if you own your home).
Financial Tune-Up 3: Increase your contributions
In 2015, set up or increase your Flexible Savings Account (FSA) or Health Savings Account (HSA) contributions. If your employer offers these accounts, consider signing up with either an FSA or HSA to take advantage of tax deductions and save yourself some money on health care.
If you’re already signed up, the IRS increased contribution limits from 2014 to 2015, so take advantage of those new limits by increasing the amount you deduct from your paycheck each month, or how much you contribute on your own if not done through your employer.
Haven’t yet signed up for an FSA or HSA account, and not sure if you should? Harry has made the case for why you should get an HSA here, here, and here. If you’re a younger, healthy adult who rarely goes to the doctor, and you want a triple tax advantage, consider signing up!
Financial Tune-Up 4: Check your IRS withholdings
Before tax season even starts, check your IRS withholdings and make adjustments as necessary. If you’ve had any major life changes, such as a marriage or birth of a baby, it’s definitely time to check how much you’re having withheld and if you’re paying enough in taxes.
The IRS has a handy tool to see if you’re withholding enough. While it’s nice to get a big windfall in April or May, don’t forget that the refund you received was your money all along. You were simply giving the government an interest-free loan instead of being able to use, save, or invest that money.
Financial Tune-Up 5: Rebalance your investment portfolio
It’s easy to forget about your retirement or investment portfolio if you don’t check on it regularly, but it’s important to rebalance your portfolio. The beginning of 2015 is a great time to check on your portfolio and rebalance as necessary.
How you rebalance is up to you and your priorities right now: someone who isn’t planning on retiring for 40 years will likely have a riskier portfolio than someone who’s looking to purchase a house in 5 years. In either scenario, you will rebalance according to your initial set up. If you originally allocated 60% of your portfolio to stocks and 40% to bonds, but you currently have 52% and 48% respectively, you’ll want to sell off some of your bonds and purchase stocks in order to get your asset allocation back to its original 60/40.
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Take this new year to reflect on your finances and make changes where applicable. In January, you may find yourself with some free time and the willpower necessary to sit down and take a couple minutes for these financial tune-ups. By carving out a little time now, you’ll save yourself money and enter the new year confident you have done your annual tune-up.
Aldo @ Million Dollar Ninja says
A financial tune-up is definitely something we all should do at least once a year. And what better time to do it than in January.
So true – our willpower and motivation is probably higher in January, with everyone reminding us to set our resolutions. Might as well do a financial tune up too!
These are all great things to think about for the new year. I do need to check around for insurance and make sure we have the best rates. Thanks for the reminder!
Glad it was a helpful reminder, Michelle!
Great reminder about increasing contributions. One my my deals with myself is I put half of my annual raise into my retirement savings. Last year we got 4% so 2% went into more 401k contribution.
Harry Campbell says
Wow 4% is great for an annual raise, why not the whole thing though?
This is a great list for everyone looking into a financially fit year this 2015. I’m all for increasing contributions not just in your retirement fund but also in your savings and emergency fund. Increasing your savings and funds can help keep you afloat during times of need. You never know when your extra savings will me most useful.
Great roundup as usual, really enjoyed your article. Thanks for sharing your article about these 5 Financial Tune Ups to Do in January. I will definitely share this to my friends. Looking forward for your best article this year.
Thomas @ i need money ASAP! says
Great suggestions! Last time I reviewed my insurance I ended up saving $700/yr. That was two years ago now so I think its about time to do it again. Thanks for the reminder!
Wow, that’s awesome Thomas! I hope you’re able to save that much or more this year too!