Before you pop the cork on the New Year, make some financial resolutions to make sure it's a good year. Image: CC geishaboy500/Flickr

Now is the time to get your personal finances in order. A new year is a good occasion for tying up loose ends on your financial checklist. Get off to a good start in 2011 by taking care of tax issues and re-evaluating your financial priorities.

What to put on your year-end financial checklist

Take financial steps in the week between Christmas and New Year’s Day that will make 2011 a better year than 2010. There are a few days left to address some critical tax issues for 2010. Charitable donations are still good for a 2010 tax deduction until Dec. 31. For another 2010 tax deduction, now is also a good time to dump depreciated stock. You can sell it and write off a loss up to $3,000. Consider converting an IRA to a Roth-IRA. You will pay tax on your Roth-IRA conversion, but if you do it by Dec. 31 you can spread the tax out until 2012. This week is also your last chance to get a free credit report in 2010 to make sure it’s accurate.

Financial resolutions for the new year

Find new ways to be thrifty. Start with credit card debt. Getting rid of credit card debt should be an even higher priority than saving money. Why? because the return you get on savings doesn’t come close to the high interest rates you’re paying on credit card debt. Pay down the expensive credit card debt first, then start saving. You’ll be able to save more. To help pay down credit card debt faster, figure out how much a habit costs and give it up. Make your own coffee or ride your bike to work. Take the money you would spend on lattes and gas and increase your monthly credit card payments.

Work together on financial goals

A lot of personal finance advisers recommend writing down your financial goals for the coming year. However, most people who do that soon forget them. In addition to writing down your financial goals, tell a member of your family or a friend you trust what your priorities will be. Ask them to hold you accountable to your promises and offer to do the same for them. Together you can both be more successful than you would going it alone.

Sources

Sacramento Bee

Wall Street Journal

Personal financial literacy begins in the home, but a survey shows that most parents give their own financial skills failing grades. Flickr photo.

Who else do kids have but their parents for getting a personal financial education? And what are they learning? A recent survey showed that most people learned their personal finance skills at home, from their parents. But the same survey showed that a great portion of those people gave themselves failing financial grades. Some people say that personal financial literacy needs to be taught in school. Others say that it’s not hard for parents to get up to speed on personal financial literacy so they can pass the knowledge along.

Parents in dire need of financial education

In its 2010 Financial Literacy Survey, the National Foundation for Credit Counseling asked people where they learned the most about personal finance. Most said they learned their personal finance skills from their parents at home. But when people were asked to grade themselves for financial literacy, nearly 25 percent gave themselves a C, D or F. The NFCC concluded that those in charge of the financial education at home are in dire need of financial education themselves.

Reading, writing and personal finance?

In this tough U.S. economy, many parents are drowning in debt, not planning for retirement or saving for college or able to purchase a house. NJ.com reports that these people may have been able to avoid these troubles if they took basic financial literacy courses in school. The NJ article said only 14 percent of teens nationwide take personal finance classes in school. NJ proposed that if the rate of teens taking personal finance classes in school nationwide had been higher in the past, perhaps the U.S. economy would be stronger today.

Kids set up for financial failure?

Last year, Wells Fargo conducted a survey and found out that only 5 percent of people ages 18-21 are confident they will achieve their financial goals. The survey discovered that only 41 percent know what a credit score is; only 28 percent understand annual percentage rates; only 41 percent understand the concept of the 401(K); and only 31 percent understand compound interest.

A financial tune-up for parents

It may be awhile before your school district decides to follow the lead of New Jersey, which is running a pilot project requiring financial literacy classes for high school students. But until then you can set a good example for the kids by getting your financial house in order with a mid-year financial tune-up. Boston.com offers five good places to start:

1. Budget and Spending — Take a look at your spending plan from the beginning of the year and compare your cash flow for the first six months. Did you allocate enough to cover expenses, or are you falling behind in certain areas? Start tracking every penny you spend, put a plan in place and stick to it.

2. Savings — Set aside cash for emergencies and short-term goals. Even a small amount can play an important role. The Consumer Federation of America found that with just $500 in the bank, you’ll sleep better and will be more likely to avoid high-cost borrowing and nasty fees for overdrafts.

3. Debt — Carrying high debt loads can have a big effect on your credit score, make monthly budgeting more difficult and leave you more vulnerable in emergencies. The first step toward solving these problems is to stop using plastic and chart a plan for paying off your cards.

4. Taxes —There’s a lot of uncertainty for people who try to plan for taxes this year, because Congress has not yet addressed a number of expired tax laws. But tax rates are expected to go up for all but the lowest income brackets in 2011,so be prepared.

5. Retirement — A retirement plan review starts with your 401(k), but it doesn’t end there. It includes Social Security and company pensions, as well. Figure out how much money you need to provide for yourself, and then to put a plan together.

Mismatched Money Styles

It’s one of the oldest recipes for romantic comedies out there – spendthrift girl falls in love with penny-pinching boy and the two spend the rest of the movie bickering over their conflicting money management styles. In real life, though, this situation isn’t nearly as funny. A mismatch in financial personalities can lead to serious conflict – even divorce – if the parties aren’t willing to work with each other on their shared financial future.

Of course, this doesn’t mean that you’re doomed to eternal marital strife if you find yourself in this situation. With a little practice, it is possible to overcome these differences and create a healthier, happier future – at least as far as your money’s concerned. Here’s how to get started:

Lesson #1 – Practice Good Communication Skills

Unfortunately, money is one of those things that no one ever talks about, so it can be difficult to begin an open and honest dialogue with your partner about your financial situation. However, you’ve got to start somewhere, so focus on speaking in “I” phrases (for example, “I feel” rather than “You make me feel”) and listening to everything your partner shares with an open mind. Be patient with one another and respect that it might take some time to work through months – or even years – of differences.

Lesson #2 – Discuss Your Financial Goals

Instead of focusing on your differences, concentrate on the things that bring you together as a couple – your shared financial goals. For example, if you have shared credit card debt that needs to be paid off, focus your energy on eliminating the debt, instead of on what each person is or isn’t doing right. If you’re saving for the down payment on a new home, discuss the steps that each of you can take to ensure that you reach your goals together. By teaming up to strive for your common goals, you place yourselves on the same side of the argument – instead of fighting one another’s natural spending habits.

Lesson #3 – Set a Budget Together

Once you have your financial goals in mind, it’s time to lay out a concrete plan for reaching them together. The best budgets require both parties to make sacrifices and compromises, while still leaving some room for error. A plan that requires one partner to change completely to match the other – for example, a plan where the free-wheeling party is required to cut all extraneous expenditures – will only lead to resentment in the long run.

After you’ve put together your joint budget, support each other as you make progress towards your goals. And, although it can be difficult, try not to chastise each other for small mistakes – whether from the spender who falls out of line and makes an extra purchase or the saver who diverts funds away from the shared goals. Keep your final goals in mind and you’ll find that it’s easy to work together as a team – no matter how different your usual money management styles may be.

Consumers need to avoid reckless spending

It’s been an eighteen-month long recession that consumers have made their ways through. Though they had many difficulties and struggles, they are now on the road to recovery. Some consumers are looking to jump into the world of spending and splurge. They aren’t a big slice of the population, but they are still there. Ethan Ewing, president of Bills.com, said, “It’s tempting for many consumers to throw open their wallets as a backlash against much of the restraint they showed throughout the year. But the best way forward for both individual and the larger economy is a balanced save and spend strategy that can sustain households while eliminating dangerous behavior.”
(See http://www.marketwire.com/press-release/Billscom-Consumer-Advocate-Cautions-Responsible-Spending-in-2010-1100344.htm)

Consumers target saving as a priority

Many consumers are looking to reward themselves due to making it through the recession. Despite their desires, though, most are holding back. They realize that haphazard spending is the worst thing they can do coming out of the economic depression. As a result of the difficulties, many consumers have renewed their commitment to saving—and not saving leftovers, but rather saving like their parents did: Making savings a priority and doing whatever it takes to reach financial goals. For those who want to start saving, here are some healthy tips to follow:

1. Assessments. The first step to saving is to assess the situation. Consumers need to be honest about where their problem issues are in terms of savings. Do they go out to dinner too much? Do they pay too much for insurance? Are they not stocking enough away for savings? These are all questions to ask during the initial stage of review.
2. Planning. After deciding what the financial goals are, next consumers need to start planning how to reach them. A realistic monthly budget should immediately come into play. It should take into account any planned yearly purchases like a new car, appliance or any other high-priced item. This is also where retirement and education funds should be planned for.
3. Execute the plan. This is where a lot of consumers get tripped up—when it comes down to actually sticking to the plan. If the plan was realistic, there should be motivation to keep it going. This is where a good financial planner may come in handy. He or she can explain the various methods available for reaching goals. Depending on goals, some consumers may be happy with a Certificate of Deposit, whereas others may need a 529 Education fund to serve their purposes. This is also where 401k accounts should be settled and the decision to put money into them consistently should be committed to.
4. Saving should be a priority. Saving for retirement should always be a priority. In today’s unstable economy, no one knows what tomorrow will bring. All that is known is that Social Security is quickly depleting and most likely won’t be available for much longer. That makes it crucial for consumers to take their futures into their own hands.

Saving for the future

Now that the economy is starting to stabilize, consumers are in the perfect position to reassess their goals. It’s an opportune time to create new plans to save. Any consumer who wants to save should first start with a good plan and a way to execute it. It will take time, but with some commitment and focus, financial goals can be reached.

In the US there are over 1.2 million charities and other nonprofits hoping to reach their financial goals this year. Unfortunately, due to the recession many are predicted to fall short. More than 93% of nonprofits are experiencing notable declines in charitable donations. According to The Bridgespan Group, a consulting organization for nonprofits, not only is funding from citizens getting smaller, but other forms of funding are being cut drastically.

The Salvation Army suffers

Everyone has seen them on street corners and in front of businesses. The jolly worker rings the Salvation Army bell, hoping for donations from passersby. This year even the famed Salvation Army is planning on a shortfall. Normally Thanksgiving through Christmas is the peak season for the charity to raise funds. Major George Hood, Chief Communications Officer for the Salvation Army, said, “Fundraising is very difficult in this economy, yet we know that there are people suffering in all 50 states.”

Since the recession, spending has declined drastically. A shortage of people traveling the streets to buy, means a shortage of people passing by the red-kettle ringers. Hood added, “That impulsive giving can be jeopardized if there is no foot traffic in malls. The reality is that we are in a tough economic period. We have to be prepared for it. All we can do it get out there and do what we do and know that the American public has never let us down.”

Service organizations suffer

Another sector braced for a lack of funding is service organizations. Karen Pushaw, director of a soup kitchen in Philadelphia, said, “More people are seeking services at the same time as fewer people are able to contribute.” Service organizations are expecting a decline in funding along with an increased demand for help from the needy. One facility in New York City called Nazareth Housing, a 58-bed homeless shelter, has been operating at full capacity since June of this year.

The organization does not expect to meet its budget, but has a “no one turned away” policy that presses them to stay open until there is no room available. Executive Director Michael Callaghan said, “There are a variety of fiscal stresses on nonprofits. Many small not-for-profits are failing, or they are so reduced that they are unable to do their missions. We are going to see more people go out of business, which will add to unemployment and leave gaps in services.”

When will charities and service organizations mend?

Industry experts are looking to the past as a gauge on how the charitable market will recover. In the Great Depression it took three to four years for charitable giving to return to normal. Experts have good news though—they say that due to the income level per capita being much higher than in the 40s, recovery could happen much quicker. The recession hampered businesses and organizations drastically, but hope in a recovery is much stronger than it was in previous economic downturns. Most likely, charities and service organizations will mend and see the same numbers they once did when the economic turnaround is complete.