How to keep your finances healthy throughout the year


If you are like many Americans, you made a commitment to yourself to kick off 2014 on the right financial foot. A record 54 percent of us resolved to save more, spend less and improve financial habits, according to Fidelity Investments®’ fifth annual New Year Financial Resolutions Study.* Now that the New Year is underway, it’s time to get serious about how to accomplish those goals.

The transition toward smarter saving and spending is no real surprise, continuing a trend started among consumers following the 2008-09 economic recession. Over the past year, Americans have been saving at an average rate of 4.9 percent, up from 2.9 percent in 2007. And while savings have historically been weighted more heavily in favor of long term goals (think retirement or college funding), this year’s study finds consumers planning increasingly for shorter term expenses as well (like vacations, major purchases and emergency funds).

Maintaining a better balance between short and long-term goals is an important indicator that Americans are once again able to plan and save more for discretionary purchase than they were a few years ago. To keep a balance in place for your own finances, it’s helpful to break goals down into small steps and monitor them regularly throughout the year.

Take advantage of the New Year momentum and get started planning and tracking your goals by following this yearly breakdown:

January – March: Where you are and where you’re headed

Creating a budget is the first step of the process. Determine your necessary and discretionary monthly expenses and compare them to your income, looking for ways to cut costs, pay down debt or save more. Make sure some of that savings is earmarked for retirement as well— at least enough to take advantage of any matching contributions your employer offers. In March, take a moment to gather together your tax paperwork and start the preparation process.

April – June: Directing your money

Take a closer look at where your money is going. Consider opening or funding an IRA if you haven’t done so already. Remember that contributions made up until April 15th may potentially reduce your taxable income for 2013 if certain conditions are met. If you have children, now might be the time to ramp up your college savings strategy. Consider tax-deferred 529 savings plans offered through your state or state agencies, which allow federal income tax-free withdrawals to pay for qualified higher education expenses.

July – September: Striking the right balance

Now that you’ve hit the halfway point, look back at the progress you’ve made and re-examine your asset allocation. The right account mix is an important component of a smart saving strategy.

If you have any credit card debt, consider paying it down as soon as possible. The interest you accumulate on it can quickly tilt the tables away from your goals.

October – December: Looking back and planning ahead

Review your finances for the year and create a year-end tax plan. Smart investing moves, such as education or energy efficiency credits and tax-loss harvesting strategies may help reduce next year’s tax burden. The more planning you are able to do at this stage of the game, the easier it will be to make and keep new financial resolutions in 2015.

While some of these steps may be easier than others, your commitment to create a proactive plan and track progress throughout the year will help you keep your resolutions in 2014, and beyond. In the process, you’ll create new, constructive financial habits that put you on the path toward long-term financial security.

Michael Pizzitola is vice president and branch manager of Fidelity’s Towson Investor Center located at 610 York Road across from Millennium Park.