2014 is just around the corner. In a little over two weeks, we will be ushering the new year! Isn’t it exciting?
Most of us are better off compared to the previous new years – at least, we are financially. The financial changes in 2013 were generally good. Consumer debt is still rising but that is mostly because of student debt and auto loans. Home loans and credit card debt are both going down steadily. We can argue that student loans have the potential to turn the borrower’s life around because it gives them the skills that will help them improve their earning potential. We cannot say the same for auto loans but we can assume that consumers are getting more confident about their money to allow them to purchase vehicles for their convenience.
Regardless of your current condition, the start of the new year signifies the start of something that can change our lives for good. We cannot help but be hopeful that things will get a lot better than it was in 2013. But even as you look into these assumptions and aspirations, it pays to have a literal plan that you can follow.
3 money moves in 2014 that can take you to the next level
Based on the recent news that we heard as the year comes to a close, we have three suggestions on certain money moves that you can make. As long as you are making your plan for the financial changes in 2014, you might want to incorporate these.
Retirement contributions
First involves your retirement contributions. The IRA.gov announced certain changes that can affect your retirement plan. The contribution limit remains the same but the slight changes on the income limit can help improve your retirement preparations. The income limit that defines who can contribute to the Roth IRA. The Adjusted Gross Income (AGI) increased only by a thousand or so but this can mean a lot of people will qualify for this contribution. The same is true for those who want to claim saver’s tax credit.
While these revisions will not really boost your retirement contributions significantly, it should be enough to keep pace with the adjustments on the Consumer Price Index. The CPI, according to the IRS is one of the main reasons why the adjustments are made. It is meant to help consumers make sure that their retirement fund will last as long as they are needed.
You may want to take advantage of this by reviewing your current retirement plan and checking out if you qualify for any tax credits that can possibly allow you to increase your contributions. Or at least, free up the money that you can use for something equally important – like your debts.
Postpone home purchases
Major financial changes can also be expected from mortgage loans. As discussed in a previous article on this site, “Mortgage Loans: What To Expect In 2014,” rules have been revised when it comes to qualifying for mortgage loans.
Lenders are expected to impose a more strict underwriting process that involves a lot more qualifications. Instead of just relying on the usual income and credit score, consumers will also be tested on their debt to income ratio and the other financial obligations that they have prior to the mortgage loan.
If you have plans of buying a home, this is a financial change that can directly affect you – especially if you haven’t applied for a home loan yet. You might want to postpone your home buying efforts – at least until after you are sure that you can qualify for a mortgage loan easily. Among the things that you need to work on is your credit score, your existing debts and your down payment. The more down payment you can save, the less percentage of the home price you have to loan.
Boost your emergency fund
Lastly, we highly encourage you to boost your emergency fund in light of the financial situation of the country.
Based on an article off CNBC.com, the country’s lawmakers have yet to finalize a budget deal that is aimed to prevent another government shutdown scheduled on January 15, 2014. Not only that, they have yet to make a decision on the debt ceiling that was once again postponed until next year.
The budget deal that the government is aiming for also includes some spending cuts that will affect some federal agencies. If you are relying on benefits from some of these agencies or you are directly or indirectly working for them, this can seriously impact your monthly cash inflow.
It may be too early to say how this can affect you but the smart way to react to this is to immediately work on your emergency fund. You might want to contribute more into this fund to make sure that you will not be left with a significant loss when things turn for the worse. If all of this ends up being an overreaction, then you lose nothing. You can continue living the way you used to and you can even decide to treat the whole family on a vacation with the money that you saved up.
Tips to help you improve your finances next year
While the financial changes that are being implemented next year may or may not affect you, it is important to at least make some plans for your personal finances next year. Improve your financial standing so you can possibly keep debt crisis at bay. The future is always uncertain and you can only hope to get past unexpected crises if you prepare for it ahead of time.
To help you accomplish this to improve your financial standing in 2014, here are some steps that we have compiled for you.
Set financial goals that you want to reach this coming year. For instance, you want to save up 10% of your target home price. Or you want to grow your savings by 20%. It can even be a specific amount. You can choose to have short term goals like saving enough to afford a vacation for your family.
Create a plan. As you define your goals, you may want to create a plan that will help you get to them. Be as specific as you can. It is possible for you to set markers throughout the year to help check if you are right on schedule. These will merely be a guide so try not to obsess too much about it.
Find the means to help you achieve your goals. When you have your plan, you will basically know what you need to accomplish them. For instance, if you need a specific amount to finance your goal, then you can look for ways to earn more. Or if there is a need to get a loan for the home you will buy, you can work on you credit score to increase your chances of getting a low interest on your loan.
Organize the tasks on your calendar – on a monthly basis. You can break down your tasks further to make them more manageable. This way, you do not have to feel too overwhelmed by what you have to accomplish in a year’s time. You can focus on one step at a time. That should make it easier to complete if you do it by portions.
All of these preparations are necessary to ensure that the financial changes that you will encounter in 2014 will only be positive ones. Work hard and stick to the plan – but be open minded as well.