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2014 New Year’s Resolution: Tone Your Finances

Posted on Mon, Jan 13, 2014

When was the last time you evaluated your financial position and spending habits? It's easy to allow finances to become bloated and flabby, especially during the holidays. As you ring in the New Year, take time to review your personal and small business budgets for opportunities to operate more lean and fit in 2014 and beyond. 

The holiday season provides an excuse to eat too much and exercise too little. So by the time New Year's rolls around, many Americans return to the health club, resolving to stick to an exercise regime.

But our physiques aren't the only "assets" that could benefit from exercising extra diligence in the new year. Many people have flabby spending habits. Here are five ways to trim the fat and add discipline to your personal finances in 2014:

1. Refinance Your Mortgage

Checklist of Small Business Resolutions

Many small business owners have been focused on providing health insurance coverage that complies with the Affordable Care Act. In doing so, they may have neglected other administrative tasks. Like individuals, businesses might want to tackle these projects in 2014:

1. Renegotiate your lease. You may be overpaying rent if you signed your lease five (or more) years ago. If your current landlord isn't willing to renegotiate the lease terms, consider switching to another location with lower rent, more usable space or superior amenities. In many areas, it's still a renter's market.

If you think you may be overpaying on property taxes, please email and she can arrange a free property analysis for you.

2. Write (and update) formal job descriptions. These help new and existing employees better understand their responsibilities and management's expectations. Job descriptions also provide a paper trail if an employee is fired for subpar performance or tax authorities audit owners' compensation levels.

3. Inventory fixed assets. Physically tag and record identification numbers for all fixed assets. Missing or damaged items will likely be revealed when you compare your physical inventory to the computerized fixed asset ledger obtained from your accounting records.

4. Write off uncollectible accounts and obsolete equipment. Chances are your balance sheet contains assets that are unlikely to be converted into cash. Some customers simply won't pay and some equipment is broken or stolen. Write these items off now, and you'll have a cleaner, more meaningful balance sheet going forward.

5. Perform a physical inventory count. This is part of a CPA's required audit procedures. But if your financial statements are reviewed, compiled or prepared in-house, you might have more confidence in the inventory accounting records if an outside firm oversees your in-house inventory counting procedures.

You can also ask your CPA to perform its own independent count or contact EHTC's audit specialist Curt Reppuhn, CPA at

6. Conduct an energy audit. Determine where, when, why and how your company uses water and energy. Then, identify opportunities to improve efficiency, decrease usage and reduce waste and emissions.

If you would like to receive a free energy analysis, please email and she can arrange one for you.

7. Evaluate business insurance coverage. The types of coverage that worked last year may be insufficient today. Values may have changed, assets may have been added (or retired), or risks may have shifted or emerged, for example.

8. Obtain a business appraisal. Knowing what your business is worth can guide short- and long-term business strategy decisions, such as accepting a purchase offer, buying out minority shareholders, modifying insurance coverage, filing for bankruptcy or requesting credit lines.

9. Plan an exit strategy. Every business eventually sells (or liquidates). Exit strategies outline how owners will someday get cash out of the business. Examples include gifts (or sales) to family members, mergers with competitors or public offerings.

To begin an exit strategy, contact Dennis Echelbarger, CPA/CFF/CGMA at Dennis has over 35 years of experience.

10. Consult with professional advisers. Accountants and lawyers know the latest developments that affect your local market and industry niche. They can customize a more comprehensive list of administrative tasks to whip your company into shape in 2014 and beyond.


Last September, the Federal Reserve announced plans to keep the Fed Funds rate at "exceptionally low levels" at least through the end of 2015. This is good news if you've been meaning to refinance your mortgage, but haven't started the process yet.

Most banks reserve their best rates to people with excellent credit scores who have at least 20% equity invested in their homes. You can lower your rate further by reducing its term (20-year loans are generally cheaper than 30-year loans) and providing a lump-sum payment towards equity at closing. Adjustable rate loans usually have lower interest rates, too. But, beware. These can be risky over the long run because your mortgage rate can reset significantly higher as inflation rises.

Whether refinancing makes sense depends on more than the differential between your home's existing interest rate and today's prevailing interest rate. It also depends on how long you plan to live in your home, the closing costs and the term of your new loan.

2. Evaluate Your Insurance Coverage

Take stock of your insurance needs, including:
• Life and disability;
• Homeowners;
• Flood and disaster;
• Auto;
• Medical and dental; and
• Long-term care.

You might need more or less coverage (or higher or lower deductibles) than last year, as life situations evolve. Employer-provided policies usually can be modified at the company's fiscal year-end (or if your life situation changes). Consider shopping around now for other types of coverage (or if you're self-employed).

Although it's easier to maintain the status quo, don't automatically renew without obtaining some competing bids. Often, bundling all your policies with one provider can lower costs.

Life insurance is a product that many people purchase and then like to forget about. Every year, ask yourself whether existing coverage (combined with your savings and investments) will give your loved ones enough cash for a decent lifestyle if you should die prematurely.

One rule of thumb for a "primary breadwinner" is that coverage should equal to six to ten times income. For example, if you have income of $75,000, purchase $450,000 to $750,000 of death benefits. You may want to be on the higher end of this range (or above), if you have young children, dependents with special needs, large debts or other special considerations.

3. Cut Extraneous Spending

Take a hard look at your monthly expenses to decide what you can realistically eliminate. Many vendors (such as health clubs, magazines, online greeting card companies, anti-wrinkle (or acne) creams, and anti-virus software) automatically renew monthly or annual memberships in accordance with the fine print on the original contract. Consumers who lose interest in these products are often too preoccupied to cancel them. Doing so can save hundreds of dollars over a year.

Also, compute how much you spend on dining out. Yearly totals might be sobering!

Other extraneous items are a matter of common sense and changing times. For instance, do you still need a land line at home, or will a cell phone suffice? Are you really watching all premium cable channels (that may have started out free!), or could you downgrade your cable services? Often bundling cable, phone, internet and cell services can result in annual savings.

4. Start College Savings Programs

If you've got children (or grandchildren), the rising cost of college is probably a concern. The average annual cost of at a four-year institution for the 2013-2014 academic year ranged from $18,391 to $40,917, depending on whether the student is in-state or out of state and whether the institution is public or private, according to the College Board. This includes tuition, room, board and fees. These costs can be significantly higher at some private colleges.

Who's going to pay for college in your family and how? Fortunately, there are many college savings options, such as:
• Section 529 plans;
• Coverdell Education Savings Accounts; and
• U.S. Savings Bonds.

Each offers state and federal tax breaks, risks and rewards, restrictions, and limitations. For more information, consult with your financial professional. The sooner you start saving for college, the more affordable it will be.

5. Make or Update a Formal Estate Plan

Begin estate planning by inventorying your assets, including:
• Cash and marketable securities,
• Insurance policies,
• Business interests,
• Automobiles and
• Real estate.

Personal assets, such as jewelry and artwork, also can possess significant monetary (and sentimental) value. The difference between your assets and liabilities is your net taxable estate.

In 2014, you can transfer as much as $5.34 million of assets without incurring federal gift, estate or generation skipping transfer (GST) tax. That doesn't include the annual gift tax exclusion of $14,000 per year per donor and recipient. Estate tax is calculated on the net value of the decedent's assets as of the date of death or on the alternate valuation date, which is six months later.

Federal estate tax rates are currently as high as 40%. Quite a few states also impose estate or inheritance tax at a lower threshold (and possibly with a different lifetime gift exemption or portability provision) than the federal government does.

In addition to outright gifts, you can use other estate planning tools such as qualified terminable interest property (QTIP) trusts, Crummey trusts and family limited partnerships to minimize estate tax. They may also achieve other estate planning objectives, such as professional asset management, protection against creditors' claims and preservation of the portability provision in generation-skipping transfers and remarriages.

Financial and legal advisers can help create the optimal estate plan for your personal needs. Contact an EHTC professional and start 2014 off right!


Tags: EHTC Services, EHTC Article, 2014 Resolution, Tone Your Finances, Checklist for Small Businesses, business consulting, CPA Firm