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5 Financial Moves To Make In The Beginning Of The Year

By Erik Folgate

The new year is full of promise and optimism by many of us. I always chuckle when I go to the gym in early January, and I notice that about three times the amount of people are working out than in December. Then by February, the numbers drop again. We tend to focus more on losing weight early in the year, but there are other aspects of your life you should think about early in the year as well. To get ready for tax time and get your finances off to a good start, consider these 5 moves to make to better your finances for 2010.

Pull Your Free Credit Report

One of the most misleading marketing strategies that I can remember is the one put on by FreeCreditReport.com. This website popped up around the same time that the federal government passed a law to require Transunion, Equifax, and Experian to give a free credit report to everyone with a credit history once a year. FreeCreditReport.com IS NOT THE WEBSITE WHERE YOU PULL YOUR FREE ANNUAL CREDIT REPORT. AnnualCreditReport.com is the ONLY website approved by the federal government to give you a truly free credit report from all three credit bureaus. Any other imposter credit report website that claims to deliver free credit reports will take your credit card information and enroll you in a free trial that will start charging you a monthly fee after the trial period expires if you don’t cancel it within the trial period. Once you get your credit reports, check them for errors and inaccuracies. You can dispute any errors online through each credit bureau.

Ask For an Interest Rate Reduction On Your Credit Cards

No credit card company is going to freely reduce your interest rate. You need to play hardball with them. Threaten to close your card if they don’t reduce the interest rate. If you receive a credit card offer in the mail with a lower rate, use that specific offer to leverage a reduction in your current card. If you get specific with the customer service rep by telling them the name of the other credit card issuer and the details, they’ll start listening to you.

Visit A Tax Advisor

If your taxes aren’t complicated, you don’t need to hire a CPA to do your taxes, but it’s always a good idea to speak with a tax professional about your 2009 taxes to make sure you are aware of any and all deductions and credits you may be eligible for. Also, if you went through any major life events like marriage, a new baby, or divorce, you’ll also want advice on how that changes your taxes. To find a tax professional you can trust, check out Dave Ramsey’s endorsed local providers in your area.

Organize Your Finances

Entire books could be written on how to organize your finances. I will write an article in the near future that goes into more detail about how to organize your finances, but it starts by simplifying them. Are you the person with three checking accounts, 4 savings account, 3 brokerage accounts, and 2 CD’s? Yeah, I thought so. The first step is consolidating your money. Two checking accounts, one online savings, account, and one brokerage account is all you need. I say two checking accounts because I like having an extra checking account with a debit card where you can keep emergency fund money or money for entertainment or just to blow.

Evaluate Your Insurance Policies

Shop around to see if you can get a better rate from a different insurance company for auto, homeowners, life, and health insurance. Also, check out your coverages to see if they need to be updated or something needs to be added. A good example of this might be adding an expensive piece of jewelry you received for Christmas to a separate rider on your homeowner’s policy so it is covered in case of theft.

Take these steps in the beginning of the year, and you won’t be wondering what happened at the end of the year.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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Comments

  • Mayra Cedillo

    One book that I found to be truly helpful is I will teach you to be rich by Remit Sethi. He makes it so easy by stating step by step how to automate your finances. He also enlighten me to the wonders of online banking, in particular having an orange account, where one can set up sub-accounts.

  • Charissa Arsaoui

    I wrote a very similar article for the new year. There was a lot of financial uncertainty in 2009. People who once were spendthrifts are now enjoying the benefits of frugality. The challenge lies in how to get things for free or practically free rather than how to purchase the biggest or most expensive item that money will buy. Coupon usage is on the rise. In fact, people are making wiser, more educated decisions regarding their money because of websites and articles like these.

  • http://thefrugallawyer.com Danielle

    Working with a tax professional is one of the most important things I do each year. I got through my tax law class, but just barely. My CPA is worth every penny of the investment. My deductions are maximized in ways that I didn’t know how to do when I was using Turbo Tax. Particularly business expenses. I think this is an area that people are afraid to fully utilize.

    • Linda

      I find that a lot of tax programs seem to offer the same results- they’ll offer you minimal information until you try to do something more complicated, (like writing off a business expense). Then they just seem to bombard you with information that you have very little hope of getting through.

  • Susan

    I am in the midst of simplifying our finances. It is giving me better peace of mind and I feel more confident that our money is investied to maximize it’s earning potential.

  • Erik Folgate

    Thanks for the comments! We appreciate hearing your take on our articles! Mayra, yes, Ramit Sethi’s “I Will Teach You To Be Rich” book is great for simplifying and organizing your finances. I, too, have an ING Orange Savings account and I have 6 different sub-accounts where I organize savings money into categories.

  • Laura

    My husband and I use Mint.com to organize our finances and I’ve begun keeping all our receipts in labeled envelopes. We also have too many credit cards so we will be eliminating one credit card every 6 months until we are down to a decent amount and so this doesn’t affect our credit score as negatively as closing all at once.
    Hopefully this year we will be in much better condition than the last 2 yrs!

  • http://www.bidawiz.com Ryan

    Pulling your credit report is definitely a good tip. You’d be surprised how many people don’t do this because they think that their credit score will be updated if they pull their credit report. We all know that is not the case.

    Visiting a tax advisor is without a doubt a smart move. Picking the right one is another story. We recently put out a piece that maybe helpful. http://www.bidawiz.com/choosing-the-right-tax-preparer-for-tax-help.aspx

  • Nancy

    It is a great idea to review insurance this time of year. I think that people sometime get insurance and then go on auto-pilot in later years. They forget to compare rates with those of other companies or check their coverage as replacement costs rise. Thanks for the reminder!

  • Mike

    When finding a tax professional, if you don’t feel like you can trust/depend on them find a new one. I worked for H&R Block during school and most employees there didn’t know much more than the basics, and couldn’t help tax planning beyond the basics. I now work for a CPA, and for simple tax returns (no business income or trust income) they are often around the same price as what H&R Block charged.

  • http://www.yourfinances101.com/blog David/Yourfinances101

    I would concur with all of them.

    I actually pull my credit report three times a year, every 4 months. One time for free from each of the reporting agencies.

    I would also agree with the tax advisor–as long as its free.

    Great post

  • Gina

    I think that if there is any potential complication with your taxes, better be safe than sorry- consult with a CPA. BUT, make sure you do your homework–cheaper is not always better. I agree with checking endorsed local providers via Dave Ramsey.

  • http://www.joshperrington.com Josh Perrington

    Being in the “financial world” I see A LOT of clients’ wins…and mistakes. The #1 issue we see would absolutely be their taxes. Visiting your CPA can not be overstated. If you’re complaining about not having enough money, yet receive a $6,000 refund @ tax time…adjust your monthly withholdings.

  • Melissa

    Another idea for finding a CPA is to check the tax blog-o-sphere. Some accountants are also bloggers and they will give tips for finding a CPA and how to make the most of your tax appointment. As an added bonus, maybe you’ll find someone in your area who is a blogger and is taking new clients!

    • Elizabeth I

      When looking for a CPA, find someone whose tax approach has strategy. Let me elaborate. I worked on a tax return and the client had rental property. If you collect the check each month from the tenant and are “active” with the property, often, tax wise, the real estate investment appears as a loss (even if the rent is covering the mortgage) if you make under $100K joint or $50 individually. This client made under $100K, but had a property company that collected the check, thus, even though the property had a $5K loss, I couldn’t deducted that loss off the $100K.

      I asked the lead accountant why did this client have a property company collecting the check. The lead accountant (partner) said that he didn’t know and that “we didn’t ask those things”. The return was correct. However, the client was not told that there is a better tax strategy out there. If you were the client, wouldn’t you want to know?

      Additionally, some financial planners prepare tax returns. This is beneficial because a good financial planner will take into account the tax consequences for financial decisions.

  • Marcia Fossum

    I “shop” insurance every year for my vehicles and home. Usually on the 2nd year the price will increase so I am ready with a lower-cost provider.

  • anthy

    Thank you very much for that tip about AnnualCreditReport.com. I’ve had family members asking about which site actually gives a free credit report with no strings attached, and until now I’ve been unsure about what answer to give them. I will be passing this info on for sure.

  • Winston

    For car insurance, I saved $400 a year just by asking. I told my agent that I have found a company that offered a lower premium than what I was paying (I lied) and was going to cancel my account with them. That’s when they told me that Nationwide had recently acquired a small insurance company that would cut couple hundreds to my premium. Yay, go me!

  • Dale Wyrick

    I found that with credit card companies it is beneficial to focus on all you have done well in the history of the account. They know this information but the negotiation goes much easier if you also sound well informed.

  • http://www.artificialrobot.com Sean

    To expand on the check your credit report through annual credit report, I would say to spread this freebie out. There are 3 agencies, so if you only get one of them at a time you can check your report 3 times a year for free. I know there can be discrepancies between the agencies, but by and large they are in sync and this gives you just a bit more free protection.

  • http://www.artificialrobot.com Sean

    Re: Ask For an Interest Rate Reduction On Your Credit Cards
    I was listening to marketplace money from this past week and during the call in section the “financial expert” said that some credit card companies are using you asking for a rate reduction as an excuse to pull your file and credit report and actually raise your rate or even close your account. So definitely check your credit report first and make sure you think you deserve a better rate before asking.

  • Elizabeth I

    I would also suggest to review your utility bills, phone plans, cable/direct tv, internet, netflicks, and your grocery store once per year. It is amazing how small costs add up.

    If you have Netflicks, 3 movies at a time for $16.99 a month, and you only watch 1 movie a month (on average), then that movie cost $17. It would be cheaper to go to the $4.99 cost a month, and just go to the library and rent a movie or actually go out to the movies if you want to see move than 2 movies a month.

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