Seven financial tips for parents in the New Year

Lots of people try to makeover their bodies for the new year, but many parents would much rather makeover their bank accounts.Here are a few simple tips to get your fiscal house in order this year:

1. Invest kids’ holiday money wisely: Kids often get cash as presents for the holidays, which is why it’s a great time to help them learn about making good financial decisions. Court loves the mantra of “Save, Spend, Share”: let your kids choose a fun way to spend one-third of their holiday haul. Then help them open a savings account, invest or use a piggy bank to save a third. Lastly, work with them to identify a non-profit, person or organization for sharing the last third.
2. Get on the same page as your spouse: In Court’s experience, most couples have never taken the time to sit down together and actually discuss their short- and long-term goals. This can lead to frustration and confusion — a recipe for disaster in any marriage. His advice? Come up with goals for the next year, then look at three to five years in the future. Eventually, you’ll need to get specific about savings goals for college and retirement.
3. Create a financial calendar: Pull out that shiny new 2016 planner and mark down any important items that you need to track, like timelines for IRA contributions, paying taxes, reviewing your budget, checking investment accounts, etc. Court recommends setting up a time once a quarter for dedicating an hour to reviewing where you are financially.
4. Review your insurance coverage: Court says most parents don’t know how their home, car, life or disability policies actually work — or even how much they have. He suggests putting together a spreadsheet of each type of coverage, and then discussing whether the insurance amounts are in line with your family’s current lifestyle.
5. Make a game plan for your tax refund (and future tax refunds): Tax season is around the corner, and while it’s tempting to blow that check on the Pottery Barn spring collection, Court says to take a breather first. “If the refund is over a few thousand dollars, it might be worth meeting with a CPA. You might benefit from having a bigger monthly surplus to save and better manage expenses,” Court said. A $2,000 refund could instead mean you have another $167 per month of income to use during the year. Otherwise, Court says to consider using the money to save into IRAs or build your emergency fund.
6. Create a budget: The vast majority of parents don’t know how much they spend per month, so they have no idea how much they can possibly save, Court says. Budgeting pro tip: be sure to track items you don’t spend money on each month like haircuts, oil changes, gifts, travel and events. Turn each of those items into a monthly expense by determining how much you spend annually, and then divide by 12. For example: if you spend $600 annually on oil changes, you are spending about $50/month on oil changes over the course of a year.
7. Budget for your vacation: Get over the winter blues by making plans for some fun in the sun (or wherever your family loves to relax). Court says take a moment to figure out how much you plan to spend on all of your travel and divide the amount by 11 (since January is almost over). You can even set up a new vacation account at the bank and each month move the monthly amount into a savings account. When the trip arrives, you’ll already have everything saved. Another tip: be sure to include expenses for hotels, souvenirs, food, taxis, etc.