Family Finance Checklist for the New Year
Appropriate financial management provides the bedrock for sustenance and stability of every unit of the society. Financial management becomes even more important at the family level as family forms the basic unit of every society.
A study shows that 90% of bankruptcy cases results either intentionally or unintentionally from poor financial management. We have always maintained that every child, mother, and father deserves a happy and stable home, solvent enough to acquire commodities and necessaries of life. Which is why financial management stands out as a must do for every family.
In a bid to save your family the undesirable consequences that emanate from failing to organize your family finance, we have come up with a few tips and guidelines towards proper family finance organization.
Here is your family finance checklist for 2019:
Reduce Your Number of Credit Cards
All thanks to civilization, cashless policies have become the order of the day. If your family has resolved to do away with cash at hand purchases and transactions, then resort to a credit card must be done correctly.
Some people may readily argue that keeping multiple cards is advantageous, but this is not always the case. Although keeping multiple cards may serve you the pleasure of using different cards for different occasions, provide a backup in case one of the other cards gets missing, and saves you from the high chances of hacking into one over a utilized card. It is safe to know that as a family, keeping just one card is wittingly appropriate. Here are a few reasons why you should avoid multiple credit lines;
- Makes Your Family Look Desperate; Opening up numerous credit lines for your family invites the credit bureaus to think that you’re up to incurring more debt. This is not a step in the right direction.
- Greater Debt Risk: The more the cards, the greater the risk of indebtedness. Every card offers an immediate and spontaneous opportunity to spend, perhaps extravagantly. You may consider reducing or limiting the number of credit cards to one or if need be two (only for husband and wife). This way, debt risk is reduced, and purchases are made by priority and indeed, necessity.
- Risk of a Lower Credit Score; There’s reasonable speculation that obtaining multiple credit lines causes a reduction of credit score. Your credit score is vital as it is one of the easiest ways lenders and debt sources determine your creditworthiness.
- Reduces Chances of Confusion; Keeping up with bills at the family level requires a great deal of concentration which can only be achieved by reducing credit lines. Double payments and other instances of disorganization can always be avoided by maintaining a single credit line. Bill consolidation is a great way to start your year if you have multiple credit cards with running balances.
Organize Your Tax Records
Over the years, numerous complaints have been made for a reformation of the family taxation policy to be ensuring more hospitality. While some reforms have been made, such as introducing family tax incentives in the form of reduction per dependent (that is, the $1000 tax credit per child in the U.S), it is safe to say that family taxation has been the least friendly of policies.
To stay afloat regardless of unfriendly tax policies, it is necessary for families to keep tax records.
But first, what is tax record? And why is it important?
In the fundamental sense, tax records refer to all material entries and documents relevant to tax authorities in making determinations as to liabilities. The very essence of appropriate tax records cannot be overemphasized.
Your tax returns play a positive role in ensuring that you don’t bear undeserving liabilities to tax authorities. Inadequate, missing or altered tax returns may amount additional taxes or other unwarranted penalties.
As a general guideline, your tax records should possess the following:
- Details of Your Income; Accurate entries as to your annual earnings should be included in your tax returns.
- Detailed Account of Previous Tax Payments; This serves as evidence that you are well a step ahead in tax payment and establishes your family as free from tax revenue debt.
- Details of Credits and Deductions: These are rights attributed to different categories of taxpayers. Tax credit refers to an entitlement (monetary payment) of a taxpayer which usually comes in the form of earned income credits, child tax credit as well as residential credit. Deductions, as opposed to credits (monetary payments), refer to a percentage reduction in tax payable. Thus any entitlement in the form of deductions must be stipulated in your tax returns
- Details of Interest on Investments and Income Dividend: All income derived should be reported, period.
Review Your Life Insurance
An insurance refers merely to a contract in which a party known as the insured/assured enters an into undertaking with some other party known as the insurer (insurance company), to the effect that in exchange for payment of specified premium by the insured, the insurer would indemnify or compensate him upon the occurrence of a specific event.
There are various forms of insurance contracts among which include ‘Life Insurance.’ Life insurance involves a contract with an insurance company to pay specified beneficiaries a specific amount of money upon the death of an individual. Life insurance policies are particularly important and central to family planning.
While it may be quite disheartening to lose a family member (especially a father or mother), it is important to take steps to mitigate hardship in case of a loss. It is on this note that it is advisable for family sustainability to execute a life insurance policy and ensure it is reviewed from time to time.
Monitor Your Cell Phone Usage
Making plans on how to manage your family finances would be incomplete without ensuring appropriate regulation of subscribed services. Even as a cell phone is an essential communication device that every family must have, the need for its usage regulation cannot be overemphasized. You must be clear on the terms of contract with your service provider to ensure that you are not being charged for services you didn’t contract for.
Money, like emotions, is something you must control to keep your life on the right track. – Natasha Munson
Regular monthly bill check will go a long way in curbing excessive charges in case any issue arises. You must ensure that your family members are frugal with regards to cell phone usage as you definitely would not love to see cell phone bills drain your income.
Open a Health Savings Account (HSA)
There is no exaggeration in the saying that ‘good health is wealth.’ Indeed one would instead take measures to prevent the occurrences of health hazards than incur the excessive expenses that accompany treatment. However, while keeping fit, regular exercises, appropriate diet, and many more health cautious tips would go a long way, it certainly doesn’t guarantee perfect health all the time.
In the circumstance of undesired health hazards or perhaps in cases of lengthy chronic illness, it would save your family some financial fortune to bank on a health savings account.
A health savings account operates in the same vein as a regular savings account just that all monies from the account are appropriated only to health demands of account beneficiaries (yourself and family members in this context). However, to operate a health savings account, you must have a health insurance plan. Some of the advantages of a Health savings account include:
- The System is Convenient; Having a Health Savings Account entitles you to a debit card which means you could pay for health services via the account at anywhere and time.
- It Permits Tax-Free Withdrawals; Withdrawals from the account are not subjected to any form of tax whatsoever.
- It Permits Direct Contributions; Health Savings Accounts are known to permit contributions from external sources such as employers, friends and many more who are not holders of the account.
Review Your 401k Contributions
Another good family finance practice is reviewing your 401k plan. What is a 401k contribution? This is a retirement savings plan championed by one’s employer. This plan enables employees to save and invest a portion of their earnings before such earnings are subjected to tax.
This plan allows direct payment from employees’ incomes as well as permits employers contribution. For a lot of people, the 401k provides a viable alternative to pension plans. However, they are two forms of 401(k) plan and whichever you choose to operate should depend solely on your preferences and utility;
- The Traditional 401k Plan; which allows contributions before your earnings are being taxed, but you must pay income taxes when withdrawing the contributions. For 2019, your contribution to a 401k plan was increased to $19,000 from $18,500 in 2018.
- The Roth 401k Plan; earnings are being taxed before contributions are made, but no taxes will be paid upon withdrawal.
Improve Your Credit Score
We already talked about credit score when we discussed the need to desist from multiple credit lines. A credit score is an expression which numerically represents your creditworthiness. It enables external sources to determine whether or not you’re fit for loans and debts generally. Here are a few ways you could improve your credit score;
- Make Credit Payments on Time; Endeavour to initiate a system which reminds you to pay your bills and dues on time
- Fewer Debts Make for a Better Credit Score; consciously work towards incurring little to no debts
- Desist from Opening a Lot of New Accounts; this applies particularly to new credit users as it may invariably affect your score.
Contest Your Property Tax
Yes! Property taxes can be glaringly outrageous. This is why you should be very skeptical when it comes to the assessment and valuation of your properties. The state doesn’t care about you when it comes to generating tax revenues and as such the best you could do is contest outrageous taxes. This is done by appealing the assessed value assigned to your property. To successfully appeal your property tax bill, check out this guide from Houselogic.com.
In summary, family finance is of utmost priority for a better living. You should see to it that your family meets day-to-day demands without stress. This is why I have provided the tips above to help your family stand out resourcefully and free from solvency issues.
Enough of the long story now is the time to be more practical, it’s time to see to it that your family achieves its financial stability.