Your Financial Resolutions Review for 2010
Merry Christmas, Starting Out fans! Since you’ve all been such good little readers this whole year, I’m happy to give you this special holiday gift: a bonus column (hey, I’m no Oprah).
To start 2010, I shared with you my 7 Money Confessions and Resolutions for the New Year, laying out common financial faults and ways to fix them. Here’s how I did in keeping my resolutions, plus some ideas about how we can all do better in years to come:
1) Budget for special occasions.
How I did: Resolved. Unlike last year, I was financially prepared this year for birthdays, holidays, wedding events, new babies and other happy days for friends and family. I trimmed my budget elsewhere -- spending less on shopping for myself, going out to eat and other miscellaneous extras -- to make sure I could afford these celebrations. So I didn’t take on a load of debt to party hard.
How you can do better: Good times don’t need very big budgets. You can spend less and still celebrate by getting great gift deals on these 21 Web Sites for Finding Deals Online. And cut back on travel costs with these Secrets to Save on Travel.
2) Budget for other irregular bills.
How I did: Somewhat resolved. My Tivo and I have never been closer now that I’ve learned to expect and budget for its annual bill. But I’ve discovered other semi-regular costs, such as bills for doctor’s visits, dry cleaning and haircuts, that should be added to the books.
How you can do better: Cut your discretionary spending and add such sporadic expenses to your annual budget. These costs might include magazine subscriptions, car-insurance payments, club-membership dues, homeowners-insurance costs and property taxes.
3) Pay all the bills on time.
How I did: Resolution fail. Despite being a personal finance writer, (shock alert) money matters are not always central to my life. When I was focused on dealing with other issues, such as family illnesses, many bills went unpaid for days past the due date. These slip-ups resulted in late fees, greater interest payments and credit score dings.
How you can do better: Use technology to back you up. You can set up automatic bill payments with most service providers or through your bank. Doing so ensures that you stay on top of your bills even when you’re busy with other things. You can even automate your savings. See Put Your Finances on Autopilot for more information.
4) Don’t depend on the Bank of Mom and Dad.
How I did: Resolved. I count on my parents for a great many things -- love, support, advice (solicited or not), the most delicious Filipino chicken adobo ever, etc. But when an unexpected cost comes up, I now turn to my emergency fund, not my mom and pops, for help. You should have three to six months’ worth of expenses saved up to cover you in times of trouble. Try our calculator for a more exact estimate of how much you should set aside for emergencies.
How you can do better: Save more in your emergency fund by using these 7 Sneaky Savings Strategies. And remember to replenish your rainy day fund as soon as possible after you dip into it.
5) Fund a Flexible Spending Account.
How I did: Over-resolved. After under-funding my FSA last year, I overcompensated and put more than I needed into the account this year. Lucky for me, my employer offers a grace period until March 15, 2011, giving me some extra time to drain my funds. To do so, I might consider these 7 Smart Uses for Your Flex-Account Money. Check with your employer to find out your FSA spending deadline.
How you can do better: Plan more carefully for 2011 health costs, and maximize your FSA benefits while you can. Health-care reform comes with some New Rules for Flexible Spending Accounts, including lower contribution limits. And unfortunately, buying bulk-size bottles of aspirin or the like won’t be so helpful after the ball drops (not for spending your FSA funds, at least). Non-prescription meds no longer count as FSA-qualifying expenses beginning in 2011.
6) Contribute to a Roth IRA.
How I did: More to resolve. While I did make regular additions to my 401(k) throughout 2009 (see Why You Need a 401(k) Right Away), I shamefully didn’t kick a cent into my Roth IRA (see Why You Need a Roth IRA). This year, I was able to bump up my Roth account funds, especially after I earned a promotion and, thankfully, received a raise. Plus, I counted the deposits I made before April 15 as 2009 contributions, and I’ll have until the 2011 tax deadline to make 2010 contributions.
How you can do better: Given the financial hurdles we’ll have to jump on the road to retirement (see The New Retirement Realities for Generations X and Y), saving as much as we can before our golden years is more important than ever. Try to squeeze more retirement savings out of your budget. If you were fortunate enough to score a raise or bonus recently, be sure to adjust your retirement savings accordingly. The Roth contribution limit is $5,000 for both 2010 and 2011. And don’t forget your 401(k) -- contribute at least enough to capture your employer match and up to the $16,500 limit for 2010 and 2011.
7) Be more charitable.
How I did: My philanthropy has bounced back to pre-recession levels as I made sure to work charitable giving into my annual budget and doubled my donation dollars since last year. I contributed on the fly to emergency situations such as the earthquake in Haiti and also donated to charities serving matters closer to home, including the American Diabetes Association and the Juvenile Diabetes Research Foundation. Plus, for holiday gifts, I made donations on behalf of a couple of friends to causes I know we both support.
How you can do better: Pick your own favorite charity, but be sure it’s a worthy cause -- see Is Your Charitable Giving Getting Results? Or Start Your Own Charity by opening a donor-advised fund or family foundation. You can also give something other than cash. For example, I donated about 12 inches of hair a few months ago (to see the cut in progress, check out my pics on Twitter). Other things you might consider donating: blood, clothes, toys, cars and of course, your time. Just be sure to keep your receipts when donating money or merchandise; you may qualify for tax deductions (see Tax Breaks for the Generous for more information).
Were you more resolute in your 2010? Please let us know about your fiscal year in the comment box below.