We are now beginning a new year and, for many Floridians, that signifies a fresh start. We have recovered and recharged from the busy holiday season and, hopefully, we are more optimistic and finding ourselves open to new possibilities, strategies and aspirations.
It is important to start the new year with practical financial habits that can help you successfully navigate 2015 and beyond.
As you begin this process, it is helpful to review your spending from 2014 and gauge your expenses for the upcoming year. Decide what is necessary and what is extraneous in each expense category. This budgeting technique is an important step as you look toward the future and determine your long-term goals. Do not forget to create a budget and then stick to it.
Avoiding the pitfalls of debt can be challenging. Keeping your expenses in check and understanding the requirements of any new financial commitments, including loans and contracts, is a key component of financial wellness.
If you use a credit card, be sure to understand the terms to which you have agreed and be ready to pay your bill on time each month. If you are unable to pay in full every month, make timely payments, probably more than the minimum required. Keeping track of your expenses and maintaining good credit leads to better interest rates on credit cards and loans and can help lower insurance premiums. Additionally, good credit will open doors to financial opportunity and empower your decision-making. There are many free resources available to consumers, which monitor credit history. Free credit reports are offered by Experian, Equifax and TransUnion.
There are many ways to protect your financial prosperity in the new year. You might try incremental budgeting, which allows you to create a yearly budget based on historical information, including percentage gains or losses you had in the previous year. This method will help you anticipate expenses and encourages a savvy, business-like approach to spending and investing.
The focus for many Floridians is saving for retirement. In the new year, you can save more for retirement on a tax-deferred basis. The limit on 401(k) contributions has increased by $500 to $18,000, up from $17,500 in the previous year. If you are age 50 or older, you can take advantage of the catch up contribution, which has also increased from $5,500 to $6,000, increasing the total amount of income you can defer to $24,000.
More importantly, remember to take advantage of free financial literacy resources and become familiar with your financial health. The Florida Office of Financial Regulations Consumer Center is one of many helpful resources available on our website, www.flofr.com. The more you understand about your finances from budgeting to investments the more confident and motivated you will be to take the right financial steps this year.
Drew J. Breakspear is commissioner of Floridas Office of Financial Regulation, www.flofr.com.
