“Auld Lang Syne” has been sung, the twinkling lights have been returned to the attic, and the inflatable Santa Claus is safely ensconced in a plastic bin in the garage. Now you’re ready to tackle a new year. To get started, take stock of your household finances and set goals for 2016. Here’s a suggested to-do list.
- Credit reports. By law, you’re entitled to a free credit report every year from each of the three major credit reporting agencies: TransUnion, Experian, and Equifax. January is a good time to review at least one of these reports. Check for unexpected charges and inaccuracies and follow up as needed.
- Home inventory. With camera in hand, go through the house and shoot a video or snap photos of your possessions. Combine the photographic record with a list of estimated value for each item. Secure a copy of the pictures and the list in a safety deposit box or off-site cloud storage. If disaster strikes, you’ll be able to itemize your assets to support insurance claims.
- Important documents. If you haven’t prepared a will, the start of a new year is a good time to do so. Without a will, your assets may not be distributed according to your wishes. In addition, you’ll want to compile a list of other vital records such as wedding licenses, insurance policies, and real estate title deeds, noting their location and contents.
- Financial goals. How much will you save in an emergency fund this year? How quickly will you pay off outstanding debts? Are your retirement plans on track? Revisit your goals and lay out steps to achieve them.
- Net worth. Calculate the value of your assets. Then subtract your liabilities to arrive at your net worth. Ideally, the number will follow an upward trend from year to year as the value of your assets (house, investments, retirement plans) increase and your liabilities (bank loans, mortgages, credit accounts) decline. If your net worth isn’t moving in the right direction, make changes. Here’s an easy way to get started: If your employer offers a cost-of-living adjustment in January, consider using the increase to bolster your 401(k) contributions.
- Old records. How long to keep records is a combination of judgment and state and federal statutes of limitations. For example, since federal tax returns can generally be audited for up to three years after filing and up to six years if the IRS suspects underreported income, a general recommendation is to keep tax records at least seven years after a return is filed. Requirements for records kept electronically are the same as for paper records.
If you’d like additional suggestions for organizing your finances and setting financial goals, contact Dye and Whitcomb, Fort Collins CPA firm.