Money Matters

February / March, 2012

Great Financial Habits for 2012

By Kristi Sullivan

Now is the time to be thinking of ways to make 2012 your most prosperous year ever. Of course, you can't control the stock market, the valuation of the dollar or future tax rates. But, chances are that opportunities for saving and building your nest egg lay right under your nose.

401(k)/403(b) Plans: Do you know that the maximum employee contribution for employer sponsored retirement plans is being raised for 2012? Starting next year, you can put $17,000 away for retirement. Look at your contributions and make sure you are taking advantage of this new higher limit.

Flexible Spending Accounts: If your employer offers FSAs and you aren't taking advantage, why not? You can put as much as your employer's maximum allowable amount away pre-tax for health care. This number will go down to $2,500 in 2013, so take advantage of higher limits in 2012 (laser eye surgery, anyone?).

You also can put away as much as $5,000 pre-tax for day care. Kids in school full time? What about that summer babysitter? Even if you pay your mom for part time childcare, that can be reimbursed with pre-tax dollars.

If you are in the 25 percent federal and 4 percent state income tax brackets and spend a combined $4,000 in medical and day care in the year, your savings will be $1,160 for 2012.

Automatic Savings: With the click of a few icons, most banks and brokerages make it easy to automatically save. Remember how your grandfather told you "pay yourself first?" He was right! And the easiest way to do that is to treat your savings plan like it is as important as your electric bill or mortgage.

Down with Consumer Debt: If you have debt on stuff (car payments, credit cards), it's time to get rid of it. Credit card debt is the most expensive, so pay that down first. When that's done, put extra money every month toward your car payment. After the car is paid off, redirect the monthly payment into a new car fund. Ideally, by the time your ride needs to be replaced, you'll have most of the cost saved and have a very small loan the next time you head to the dealership.

The difference between you now and your future millionaire self is not inheritance or a winning lotto ticket. It is small steps that add up to big nest eggs.

Kristi Sullivan is the founder of Sullivan Financial Planning, LLC, a Registered Investment Advisory Firm. She holds the Certified Financial Planner™ designation, Colorado Life and Health Insurance License and NASD Series 65 license. She's been helping individuals and families plan for their futures for 13 years. Reach her at 303-324-0014 or kristi@sullivanfinancialplanning.com.