Are you satisfied with the financial decisions you made in 2014? If you’re not so sure, this is a good time to resolve issues or make some changes for 2015. The Pennsylvania Institute of Certified Public Accountants offers these tips on the best ways to avoid common pitfalls.
Mistake #1: Out-of-control debt
Among Americans with credit cards, the average balance in the second quarter of 2014 was $5,596, an amount it would take most people months or years to pay off. Every month those balances remain outstanding, the more the interest charges add up. If you’re wrestling with high credit card balances, try using cash only for your purchases so you don’t run up any more debt. Pay as much as you can each month on your credit card bills, and consider shifting your balances to lower-interest accounts. In addition, regularly check your accounts to be sure there are no fraudulent purchases or simple mistakes that are hurting your credit score.
Mistake #2: Late payments
Whether it’s your credit card or a utility, you likely will be charged a late fee if you don’t pay that bill on time. Start by noting when payments are due on your calendar so it’s easier to remember them. If you don’t have the cash on hand when the bills come, contact the companies to see if your payment deadline can be moved to a few days after your paycheck arrives. If you can’t afford your payments, it’s a good idea to call your creditors. Explain your situation, and see if you can work out an arrangement that allows you to make smaller payments over time. If you often find yourself scrambling to pay your bills, review your budget to determine ways to lower your spending. Late fees are unnecessary expenses, so it’s worthwhile to take some time to determine how you can avoid them.
Mistake #3: Not saving
No matter what your age, it’s always a good idea to set aside a little money in an emergency fund that will cover unexpected expenses, a loss of income, or another unpleasant surprise. Likewise, saving for retirement is important, and it’s never too early to start. Saving is easier when you arrange to have a set amount deposited into a savings account each week or into a retirement account. You’ll be surprised at how quickly your money grows.
Mistake #4: Short-changed on retirement dollars
Did you know you can miss out on significant retirement income by retiring too soon? Retirement age for collecting full Social Security payments is between 65 and 70, depending on when you were born. If you retire before then, you will receive less than your full benefit for your lifetime. Your marital situation and other financial circumstances will also affect your retirement decision, so be sure to turn to your CPA for guidance.
Mistake #5: No plan
Many of life’s milestones can be very expensive. Buying a house, having a child, changing careers, sending children to college, or entering retirement all have a profound impact on your financial situation. If any of these steps are in your future, be sure to begin preparing financially as far in advance as possible.
