Are you ready for the new financial year?

2006 is ending and it’s time to start preparing for 2007 so you can start off on the right financial foot. Here are some things you can do now to make 2007 a financially fit year:

At work:

• Increase your retirement contributions. The 2007 annual retirement contribution limit for 401(k) and 403(b) plans was increased to $15,500, so make sure you adjust your contribution levels accordingly. If you can’t max out the annual retirement contribution, at least try to increase your contribution 1% this year.
  
• Review your FSA contributions. If your employer offers a Flexible Spending Account (also called a Cafeteria or Section 125 plan) it’s a great thing to take advantage of. Try to sit down and use your budget to figure out how much you’ll need for the next year. Remember, you can now use it for over-the-counter medicine like aspirin or cold medicine and things like contact lens solution. Just don’t over estimate since if you don’t use it by the end of the year you lose that money.
  
• Double check your taxes. If you’re getting a big refund for this year, you probably need to take a look at what you’re having withheld each pay check. Your goal should be to break even at tax time and take that money you would have gotten in a lump sum at tax time and invest it monthly. If you aren’t sure how much you should have withheld, www.paycheckcity.com has a great paycheck calculator. Similarly, if you’ve had a major life change (house, marriage, divorce, etc.) that impacts your taxes you should double check that your withholdings are still correct.

On your own:

• Review your asset allocation. As investments rise and fall throughout the year they can impact your asset allocation plan. Make sure that at least twice a year you are rebalancing your investment portfolio to make sure you stay on track.
• Max out your Roth IRA . If you contribute $333/month to a Roth IRA you will have maxed it out for the year. The easiest way to do this is to set up an automatic contribution plan that will deduct money automatically from your checking account and invest it in an appropriate mutual fund. If $333/month is a bit too rich for your blood, look at the program that T. Rowe Price has that will allow you to start a Roth IRAwith as little as $50 to start and $50/contribution. If you haven’t yet maxed out your 2006 contribution you have until April 15, 2007 to do so, just make sure that you indicate that the money is for your 2006 contribution or they will credit it to 2007.
• Do a budget check. Look over your budget for the last 12 months and see if there were any unexpected expenses that you need to plan for this year and adjust accordingly. Better to save up for that license plate renewal than to get caught by surprise!
  
• Review your financial goals. Are you on track for your financial goals? Have you added/removed/changed any of them? Take a look and see where you are. Increase or decrease your savings based on any changes to your financial goals.