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Financial Monthly Calendar

Making One Financial Adjustment a Month Can Help You Get Your Money in Order

With a new year upon us, it might be time to make a commitment to revisit some aspect of your finances each month. Here are some suggestions:

January — Resolve to increase savings.
With each new year, many of us resolve to quit a bad habit, but this year you should resolve to start (or ratchet up) the habit of saving. First, increase your 401(k) deferral by the same percentage as your raise. So, if you currently defer 7 percent of your paycheck to your 401(k) and your annual raise for the current year is 3 percent, increase your 401(k) contribution from 7 percent to 10 percent. You will not miss the money and will benefit from this increased savings down the line. In addition, sign up for an automatic investing program through your bank or mutual fund firm. Start with a manageable amount, like $50 or $100 a month, and increase this amount over time. By having the money automatically debited from your checking account and deposited into a savings or investment account, you miss it less than if you were to deposit the money yourself. 

February — Make your  IRA contribution.
You can contribute a total of $4,000 to either a traditional IRA or a Roth IRA for the current year, and you can make your contributions until April of the current year. If you are age 50 or older, you can contribute an additional $1,000 in catch-up contributions for a total of $5,000. To participate in a Roth IRA, your adjusted gross income, or AGI, cannot exceed $95,000 for single filers and $150,000 for joint filers. Contributions and earnings grow tax free with a Roth IRA, and eligible withdrawals are tax-free as well. With a traditional IRA, earnings and contributions grow tax-deferred with eligible withdrawals subject to income tax.

March — Avoid the rush and get organized for your current year tax-return filing.
Look out for 1099s and your W-2. To minimize the painful ordeal of completing your tax return, take the time now to gather all the necessary paperwork. By the end of this month, you should have received your W-2 wage statement from each employer, as well as form 1099 from each bank, brokerage firm, investment company and mutual fund in which you invested in_____yr. If you have not received these forms by the end of the month, call the respective institutions immediately to request additional copies. Keep in mind, even if you are not ready to delve into completing your tax return, it is important to have all the paperwork at your fingertips now, as waiting until April can often be too late. On average, it takes banks three to five business days to mail you a duplicate 1099; however, many branches allow customers to come in for a reprinted copy. Additionally, it may take up to a week for shareholders to get duplicate paper copies of their brokerage account or mutual fund 1099s.

April — Electronically file your current  tax return. According to the IRS, 65.8 million tax returns were e-filed for the  tax year (an 11.3 percent increase from the year before). When filing your current tax return, you should take advantage of this filing option, as it can result in quicker refunds and fewer errors. Specifically, on average, e-filers get their refunds in half the time of regular filers, and if you e-file and use direct deposit, you can receive your refund in approximately two weeks. In addition, e-filers have a less than 1 percent error rate because the computer software automatically checks your math.

May — Use your tax refund to pay down debt.
If you filed your taxes via paper, your refund should arrive about six weeks after you filed, and within 10 days if you filed electronically. Either way, that money will likely arrive in May, so make sure to use it to pay down any outstanding loans. With an average refund of about $2,100 last year, this money can definitely make a dent in your debt.

June — Take your car in for a tuneup, so it is in top shape for summer travel.
While this might not sound like a financial tip, it actually is — the worse shape your car is in, the more money you are going to spend on gasoline. With gas prices usually a bit higher during summer months, a poorly tuned car could really hit your pocketbook. For example, be sure to check and replace the air filter regularly, which can provide a fuel economy benefit of up to 10 percent.

July — Check your credit and improve your score.
It is important to verify regularly the accuracy of the information in your credit report, and now you can do it for free! Beginning Sept. 1, 2005, the federal Fair and Accurate Credit Transactions Act enabled everyone living in the United States to obtain a snapshot of his or her credit history once a year for free from each of the three major credit reporting agencies — Equifax, Experian and TransUnion. You can request a copy of your free three-in-one credit report, which provides data from all three credit reporting agencies, through the Web, phone or mail.

Once you know the score, work on improving your credit by setting realistic goals and committing to a timeline for reaching each goal. Given its weight in your overall credit score, the first goal on your list should be paying your bills on time. If necessary, contact your creditors to arrange for a payment plan that you can manage, thereby preventing future late payments. Next, when thinking about which debts to tackle first, generally, credit card debt is the most expensive (i.e., credit cards carry the highest interest rates), followed by car loans, mortgages and student loans, so you should start with credit cards. If you have more than one credit card, pay down those balances that are the largest relative to the credit limit first. While it is best to pay down all your debt completely, you should aim initially to reduce the amount of your total debt to 30 percent of your credit limit. For example, if your credit limit is $1,000, you should reduce your debt to a maximum of $300.

When working to improve your credit, do not accumulate more debt. The best means of prevention is to use debit instead of credit; pay more than the minimum on all your balances; and most important, do not apply for additional credit cards. Finally, remember, no one can improve your credit quickly, so do not seek the services of any organization or person who makes such guarantees. The only person who can improve your credit is you.

August — Work on your will.
When work is quiet at the end of summer, take time to evaluate your will, or if you do not have one yet, get one on the books. Approximately 55 percent of Americans do not have wills, which can put your family in a precarious situation should you die unexpectedly. While no one likes to talk about death, it is important to get your affairs in order, especially if you have children. If you have a fairly straightforward estate, you may even be able to write your own will using a software product such as Will Maker. However, if your estate is more complicated, you should seek the advice of an estate attorney in your home state, as laws regarding wills vary state by state. As your financial and personal situation may change year over year, be sure to commit to revisiting your will annually and making updates as appropriate.

September — It's back to school time … be sure to invest in a Coverdell Education Savings Account.
Depending on your income, you can invest up to $2,000 a year in a Coverdell Education Savings Account. Your investment options include mutual funds, a savings account or a brokerage account (through which you can invest in individual stocks and bonds). Although your contributions are not tax deductible, the money you invest grows tax-free, and all withdrawals from the account are tax-free as well, provided you use them for qualified education expenses. These expenses go beyond just tuition and include books, school supplies, computers and many other education-related expenses. Anyone can contribute to an education savings account on behalf of his or her child, so long as the total annual contributions do not exceed $2,000.

October — Complete a home energy audit to prepare for winter.
A home energy audit is one of the best things you can do to cut down on energy costs, and it can result in hundreds of dollars in savings. Many local energy companies offer a free online audit service that lets you enter information about your home to determine what your energy costs should be. Other energy companies or outside organizations offer in-home audits by an energy auditor for a fee, which typically ranges from $100 to $500.

November — Start your holiday shopping.
There are several advantages to starting your shopping early. First, you are not rushed and you can take the time to find the right gifts at a good price. Next, by starting early, you have more pay periods before year-end, and you can effectively budget without having to rack up debt by rushing to buy all your presents the week before Christmas. Additionally, you can take advantage of lots of sales, including end-of-fall closeouts, Veteran's Day sales and, of course, Black Friday, the day after Thanksgiving.

December — Take advantage of last-minute tax strategies.
Before the holiday parties begin, make sure that you have made all your current tax moves, such as donating to the charity of your choice, contributing to a 529 for your child and making early mortgage or property tax payments. These moves can benefit you at tax time, but they must be done before Dec. 31, so be sure to make your tax moves as early in the month as possible so as to not be scrambling on Dec. 30.

Mellody Hobson, president of Ariel Capital Management (arielmutualfunds.com) in Chicago, is ABC News' personal finance expert. Matthew Yale and Aimee Z. Daley contributed to this report.