Monthly Business Article

Eight “Common Sense” Ways to Prosper

Common sense can go a long way in your daily life. The same thing holds true for your financial affairs. Keeping that in mind, here are eight helpful hints for managing your finances.

1. Create a budget to help you manage your finances. The budget should pinpoint “problem areas” you may be encountering. If you cut back on luxuries, you should have more money to invest or to use for other purposes. Reminder: Give yourself some leeway.

2. Try to avoid late charges on mortgage payments and unnecessary finance charges, etc. Of course, there are times when you may need to incur such charges, but not for trivial purchases.

3. Avoid unnecessary travel expenses. For instance, you could be overpaying for air travel because you are booking your flights too close to your actual travel dates. Instead, if you plan ahead, you may be able to get a discount.

4. Identify your goals and when you will attain them. For example, if you are newly married and planning a family, you might have your heart set on a single-family home in a residential neighborhood. By establishing a savings plan—and sticking to it—you have a better chance of making your dream a reality.

5. Consider critical investment factors such as yield and the level of risk when you invest your money. In addition, do not overlook the effect of taxes. It’s the after-tax return on investments that counts.

6. Depending on the company you work for, you may be able to set up an automatic savings plan by making deductions from your paycheck. You can also arrange to have automatic transfers from bank accounts to brokerage accounts or individual retirement accounts at regular intervals.

7. Pay off high interest credit cards if you can. At the very least, you should transfer your balance to cards charging lower interest or consolidate your debts if it will save you money.

8. Take advantage of your company’s qualified retirement plan when it is appropriate. If you are self-employed, you may be able to contribute to a Keogh plan, a simplified employee pension (SEP) plan or a savings incentive match plan for employees (SIMPLE). Alternatively, “solo 401(k)” plans are often available to single-person operations. Assuming the plan meets specific requirements, the money that is set aside accumulates without any current tax.

No idea is earth-shattering on its own, but collectively they can make a difference. Using a little common sense can put a lot of dollars in your pocket.

Jennifer L. Daughetee
CPA/General Services Manager
Honkamp Krueger & Company