The holiday shopping season is over and the New Year has begun. Reaching your financial goals starts with getting a clear picture of where you are today. Guessing and estimating will not do; you need to know exactly where you stand financially, to the dollar if not to the penny, not in your head, but on paper (even better, on computer). To increase your wealth by December 31, 2011, here's what you need to do NOW. #####
1. Order your credit reports. You're entitled to a free copy of your credit report from each of the three major credit reporting agencies, Experian, TransUnion and Equifax, every year. Order at least one of them now. You can order all three, which gives you a better chance of catching and correcting errors in the reports, since they may differ from agency to agency. Or you can get the first one now, a second one in four months and a third in eight months as a way to monitor your credit for free during the year. Which ever way you go, you need to see what your credit history looks like. By the way, while the reports are free, your credit scores are not. Now's not the time to be cheap; pay to get your scores, which will also differ from agency to agency. Most lenders will focus on the middle number. #####
2. Do your net worth statement. That means adding up the value of all of your assets (what you own) and subtracting from that figure the total of all of your liabilities (what you owe) to come up with your net worth. Hopefully it's positive, but it may be negative. Either way, if building wealth is your goal, improving that number is what you need to be working toward during the year. There are plenty of online resources to help you calculate your net worth; here's a good one at Bankrate.com. By making this an annual exercise, you can set goals, make adjustments for changes in your life (new job, marriage, divorce, etc.) and come up with a plan to increase your wealth from year to year. #####
3. Assign real numbers to your debt. Again, this is no time for guesstimating. You need to know exactly what you owe and who you owe it to, down to the last creditor, as well as the interest rates you're paying on each balance owed. This is the first step to coming up with a real debt reduction strategy. You can't come up with a plan to eliminate debt if you really don't know what you owe. #####
4. Update your budget. This is nothing but an on-purpose, on-paper/computer plan for exactly how you will spend your money from month to month. Stop being one of those people who run out of money before they run out of month; there's no reason you should not know exactly where your money is going. If you don't have a budget, create one. If you do have one, update it for the new year--and stick to it. Wealth builders control their spending; they don't allow their spending to control them. #####
5. Start tax planning now, not in April. Building wealth means not treating your tax filings as a last minute exercise. Get a qualified tax professional, preferably a CPA, to help you make sure that you are getting all of the deductions you are entitled to and keeping as much money in your pocket as possible. That means sending the IRS no more than you actually owe, not overpaying them (effectively giving the government an interest-free loan) in hopes of getting a refund after April 15. Black Enterprise Editorial Director for Personal Finance John Simons recommends the tax calculator at www.mytaxburden.org as a way to get an idea of how much you could be expected to pay in taxes this year. By the way, the earlier you get your tax documents to your preparer, the less likely it is you'll be forced to file for an extension because you did not beat the last-minute stampede to April 15. #####
More tips to help you get richer in 2011:
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