In these pages, we often discuss what the market is doing and where you can put your money to benefit.
But in these early days of 2013, I thought it prudent to offer some quick tips on broader money management strategies that can complement specific investment recommendations.
It's not until you're managing your entire financial life — not just buying stocks — that you can truly maximize your wealth-building potential.
So to help start off the New Year on the right fiscal foot, here are a few things you should consider:
1. Track Everything
Keep a budget that tracks your savings, spending, and investments. It should include all bills, debts, incoming cash flow, assets, and home equity... with a dynamic total of your net worth.
Many are downloadable around the Web, but I created one in Excel that I use diligently. You can get if for free here.
Enter the beginning balance of you primary checking/savings account each month in the upper left-hand corner. Then fill in bills, withdraws, deposits, and other expenditures during the month. It also includes spaces for all debts and assets, as well as a space for your home value relative to what you still owe on it, if that applies.
The template is built to automatically total monthly bills, withdraws, spending, incoming cash, assets, debt, net worth, and more.
Put every single financial transaction on it: car payments, cable, phone, utility bills, student loans, IRA, brokerage accounts, savings, credit card, pay checks.
It's a great tool to see a snapshot of your finances on one page — so you can identify spending habits, problem debts, cash flow patterns, and more — and then start to use that information to make beneficial financial planning decisions.
What can I cut out? How can I maximize savings? If I'm not already, how can I get myself debt-free?
These are all questions you should be asking yourself. And an overview of all things in your financial life will help you start answering them.
(I even track every gallon of gas I buy and every mile I drive. If you want that spreadsheet, it is available here for free.)
2. Max Out Retirement Accounts
Max out any 401(k) or Savings Incentive Match Plan for Employees IRA (SIMPLE IRA) offered by your employer. Any match they offer is free money, and you should take advantage.
Outside of any employer-related plans, you should also open an individual retirement account (IRA). Your income will determine whether this is a Roth IRA or Traditional IRA. Here is a fully interactive Money Magazine explanation of how to choose which is best for you.
Whichever IRA you choose, the maximum contributions are the same, as explained by that same Money Magazine tool:
If you're younger than 50, your 2012 contributions to a traditional IRA or a Roth IRA are limited to $5,000 or the total of your taxable compensation, whichever is smaller. If you're 50 or over before the end of the year, you're allowed to contribute up to an additional $1,000 for a total yearly contribution of $6,000; this is the IRS's way of encouraging you to save more in the final years before retirement.
Make sure your IRA is fully funded before you open any other type of standard brokerage account. You can use it just like a standard to brokerage account to buy stocks, options, CDs, and bonds.
3. Consult a Tax Professional
I don't believe in paying someone to manage your money. I wholeheartedly believe you should choose your investments on your own, based on your own research. But hiring a tax professional is a very wise idea...
I know how to read the market. I know how to buy stocks and funds and options. I have little expertise on the egregiously complex U.S. tax code. So I found someone who charges a flat fee to answer all my tax questions and file them for me. You should do the same.
Ask this person as many questions as possible. Tell them about all the things you learned and have questions about from the budget you're now keeping.
He or she will alert you to tax-saving ideas and strategies you didn't know about. These ideas and strategies will more than pay for the flat fee.
They can help you with health savings accounts (HSAs), tax-loss selling, pre-paying deductible expenses, donating stock, and exactly which types of retirement accounts you should use.
They can and should be your sounding board for deciding why and how to make financial planning decisions.
The guy I use is in business for himself, charges one flat fee for the year, and isn't concerned with earning commission by selling me financial products.
Once you do these things, you'll be in a prime position to take full advantage of the investment ideas presented by Wealth Daily and its editors.
Call it like you see it,
Nick is the Founder and President of the Outsider Club, and the Investment Director of the thousands-strong stock advisory, Early Advantage. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.