January: Automate Your Security
No one's ever achieved financial fitness with a January resolution that's abandoned by February. Building security requires a commitment to saving, and the easiest way to save is with an automatic transfer. Search online for the highest-yielding bank or credit union savings account; after you've opened one, set up monthly deposits from your checking account.
If your employer matches employee contributions to a 401(k), sign up now. Already enrolled? Make sure you're contributing enough to qualify for the maximum company match, and if you're not, boost your contribution rate by one percentage point each year until you're eligible for the maximum match. Then make funding your individual retirement account (IRA) automatic as well by linking it to your checking account.
Timely Tip: If you or your child will be attending college this fall, submit your Free Application for Federal Student Aid (FAFSA) form ASAP, using estimates of your 2010 taxes.How to build an emergency savings fund
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February: Get Ahead of the Game
You should have received all documents necessary—your W-2, 1098 (if you have a mortgage), and 1099s—to complete your taxes. You've still got two months, but handling this task early has major benefits. If you're surprised by a tax bill, you have time to figure out a payment strategy. If you're entitled to a refund, you will receive it that much sooner.
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March: Do Some Spring Cleaning
Make time to toss any outdated paperwork. You should keep a copy of your tax return indefinitely, but you need to save supporting documents for only three years. Anything from before 2007 should get shredded. If you're self-employed or have income from multiple sources, hold on to your documents for six years. That's how long the IRS has to challenge your reported income. Next, roll over 401(k)s from old jobs and IRAs at different firms into one account at a low-cost brokerage or mutual fund company—it's easier to keep track of this way, and you'll save on maintenance fees.
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April: Take Stock
As we head into the sign of Taurus, take a moment to think about bull markets. For long-term savings goals, stocks have the potential to generate inflation-beating gains. But we're all a bit queasy about stocks these days. Focus your stock investments on those that pay dividends—payments a company makes to its shareholders. Sticking with a low-cost exchange traded fund (ETF) with a diversified portfolio of dividend payers is a smart strategy. Try the Vanguard Dividend Appreciation (VIG) or the SPDR S&P Dividend ETF (SDY).
Timely Tip: If you do file your taxes in April, let your return guide your next move. If you're owed a refund, change your W-4 withholding to get that money back in your paychecks where it belongs. If you owe a penalty, make sure you're not having too little money withheld.Are your investments ethical?
May: Hit a Home Run
This is the start of house-buying season, but since most of us stay put in any given year, let's focus on you current mortgage holders—starting with your homeowner's insurance. If rebuilding costs in your area have fallen in recent years, you could be overinsured. Confirm that you have an extended replacement policy, which pays a set percentage over the dollar value of your coverage. And switch to a higher deductible (at least $1,000 or so), which will lower your premium. Cover any expenses that amount to less than $1,000 with your emergency savings fund. Finally, check your property tax base. If your current property tax bill is based on an old valuation of your home, contact your local tax assessor—you may be paying too much.
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June: Gift Smart
With all the graduations and weddings coming your way, you're probably planning to purchase some presents. Here's my gift-giving rule: Respect your current financial situation. The last thing family and friends want is for you to spend money on them that you don't have or that you can't really spare.
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Next: July through December is the right time to buy a new car, make family money rules, and more