Thursday, 13 December 2012

Simplify your finances

The task of managing one's finances efficiently is very important.  This can be done by streamlining various aspects of financial management.
·         Consolidate old retirement accounts
Rolling up multiple retirement accounts into one or two IRAs is a safe bet as fewer accounts mean fewer statements up for review, saving time. This reduces the paperwork and allows for easier control of one's investments with help from a financial advisor.
·         Automate the investment process- put the savings on autopilot
The most difficult part about saving is actually setting aside the money and transferring it into an investment account. An automated system to take out savings from every month and automatic money transfers from the bank account to the investment account will help keep the investment plan on track and not fritter away the money on something else.
·         Automate payroll deposits
Using direct deposits for all income (salary, pension, social security payments etc) eliminates needless trips to the bank. Recipients of federal benefits can switch to direct deposit or a pre-paid debit card in case they are currently receiving paper checks.
·         Sign up for email / mobile alerts
With email / mobile alerts, the individual will receive immediate notification from the bank when the account balance drops below a certain amount or when credits or debits happen.
·         Pay bills online/use auto pay options
Opt for automatic bill payments so that the hassle of writing a check and posting it is avoided. Better, if automatic payments are not preferred, one can still manually authorize electronic payments from a bank account or credit card. The online bill payment mode helps streamline bookkeeping activities.
·         Use fewer credit cards
With multiple credit cards, one runs the risk of overlooking payments on time for a few of them, thereby attracting late fees and heavy interest payments, having a negative impact on the credit score. Hold on to the oldest card as it improves the credit score. Fewer credit cards mean a lighter load on the wallet of course.
·         Draw up a durable power of attorney
A durable power of attorney drawn up by a lawyer will permit a trustworthy person to safeguard assets and pay bills in case of sickness and subsequent inability to manage money matters.
·         Keep records organized
Keeping records organized throughout the year can help simplify the preparation of tax returns. Place receipts and other documents in support of income and deductions in a safe box. Using personal finance software is a high-tech way of tracking expenses and income.
·         Direct deposit of refunds
Providing directions on the tax return for refunds to be directly deposited into bank accounts is a good way of receiving the tax refund faster and saving time going to the bank and putting up a check for collection.
·         Hire a Tax Specialist
Unless the return is a straight forward one and easy to do by self, take the help of a specialist such as a CPA or EA to prepare and file it. With a tax specialist on hire, access to year-round tax planning advice is assured, ensuring reduction in taxes and avoidance of costly tax mistakes or penalties.

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