Roth IRA’s are a great way to save for the future. For those unaware a Roth IRA is just a different spin on the traditional IRA. Instead of seeing tax benefits up front – such as when you contribute to an IRA – you see your tax benefits on the back end: when you actually withdrawal from your Roth IRA. This can be a powerful way to avoid income taxes in your retirement, especially if you foresee income taxes being higher when you retire then they are today.

In 2010 there will be new rules for the Roth IRA. Starting next year the government is going to make it easier to convert a traditional IRA into a Roth IRA. Historically conversions were only an option if your AGI (adjusted gross income) was less than $100,000. This income limit is going to vanish in 2010. Another great option being given to us is the ability to spread out taxes on conversions implemented in 2010. You are being given the option to split the taxes payable due to the conversion between your tax returns for 2011 and 2012.

This is a great opportunity for those who are interested in converting an IRA into a Roth IRA in order to diversify their future retirement portfolio (and their future tax payments). I’d recommend meeting with your financial advisor for more information on the upcoming conversion and to see if a Roth IRA is right for you!

It may be cold and much too white outside for spring to be just around the corner (unless you’re lucky enough to live in Phoenix) but that does not give you an excuse to neglect your finances. To makes things easier for you I’ve decided to begin a monthly money review series to give you tips on what you can do to improve your finances. We’ll take it one step at a time, month by month, and with any luck we’ll all be much better off because of it.

If you’re owed a refund, file your taxes

Let’s face it, everyone likes to get money sent to them. If you haven’t already filed your taxes then get started. If the IRS owes you money then you might as well file now so you can get your money back sooner than later.

Contribute to an IRA

You can decrease your taxable income, and therefore increase your tax refund, by contributing to a traditional IRA before April 15th. Of course you’ll want to see a tax advisor for the specifics. Just keep in mind that if you have cash sitting around that you’re saving for retirement if it isn’t already in an IRA then it probably should be.

Review your savings plan

Do you have an emergency fund? This should be 6 months worth of living expenses stashed away into a savings account or money market fund. If you don’t already have an emergency fund then start one now. Set aside a certain percentage of every paycheck to go into this emergency fund and do not stop until you have at least 6 months worth of living expenses. You’ll feel a million times better by having cash in the bank.

I spoke earlier about how it’s important to set personal finance goals. Today I’d like to expound on this idea a little. It’s absolutely important to sit down and make finance related goals, and what better time to do this than at the start of a new year? Of course if you’re going to sit down and make goals for yourself you’ll have to think about your finances and if you have a family it’s probably a good idea to talk with them about your financial situation as well (especially your significant other).

Have you begun to think about your financial situation and where you’d like to be in a year? If you haven’t yet it’s not too late. Go ahead and sit down, do a little brainstorming and see what you can come up with. Here are a few ideas to get you started.

Review Your Insurance Coverages and Needs

Do you have a family? Are you the primary (or the sole) breadwinner? Do you own a home?

If you’ve answered yes to any of these questions (or more than one) there is a good chance that you need life insurance. If you don’t already have life insurance then now would be the time to look into it. God forbid that something bad were to happen to you or your significant other, but if one of you were to tragically pass then what sort of a financial situation would that leave your family or significant other in?

Another thing to consider is disability insurance. If you were to become disabled would you lose your income? Most employers offer disability insurance as a benefit to their employees. Check to see if it’s a benefit that you’re receiving, and if you’re not then consider signing up for it. My friend Trent at The Simple Dollar has made it a goal of his to review his insurance needs so he can be prepared in the event of a disaster.

Review Your Retirement Accounts & Plans

Are you participating in your 401k retirement account, or if it’s not an offered benefit are you investing in an IRA or Roth IRA? It’s important to start planning for retirement at an early age because the sooner you begin saving for retirement the sooner you’ll be able to retire, or the more money you’ll have when you retire.

Make sure to review the retirement plans that you have in place and if you’re not already investing in a 401k or similar retirement plan it’d be a great idea to set a goal to start saving for retirement.

Pay Down Your Debts

Do you owe thousands of dollars in credit card or other unsecured debt? This would be a great time to review what you owe and what you can do to pay down your debt as much as possible. My friend Doctor S at Finance Your Life has set himself a goal to pay down a large portion of his student loan debt throughout the next year.

Don’t Do Nothing

I hope these tips have helped to give you an idea of the kind of planning and resolution setting that you can do in order to improve your financial situation. The important thing to remember is this: don’t do nothing. I know it’s worded weirdly, grammatically speaking, but it’s true. Plan for the future and you’ll be in a much better position than you’re in today. Good luck on those New Year’s Resolutions!

While most people yearn for wealth not all will achieve any significant levels of wealth in their lifetime.

I am of the opinion that anyone can build wealth, but for most of us building wealth will take time. It doesn’t come to most of us because of our natural abilities or talents or because we were born into a wealthy family. Instead it takes time, patience and perseverance.

Wealth building is not necessarily an easy process, but it can be done. One way to attempt to ensure your future wealth is to set up an automatic savings plan.

Leverage Your Automatic Savings to Build Wealth

Does your employer offer Direct Deposit of your paycheck? If it does you might consider using Direct Deposit to automatically transfer a certain amount (or percentage) of your paycheck into a savings account (or various savings accounts). It’s important to save for various large expenses, as well as for emergency needs and then of course, retirement.

For example, if you don’t already have an emergency fund you might consider opening a high-yield savings account, such as the Orange Savings Account, or a money market account and then setting up your paycheck to automatically deposit a certain amount (or percentage) every pay period into your emergency fund account.

It would also be wise of you to set aside a certain portion for any large purchases you plan to make in the future. If you have kids you might consider setting aside a certain dollar amount every month for their future educational expenses, for example. Of course you’ll also want to consider retirement. If you’re not already taking advantage of an employer sponsored retirement account (such as a 401k) then start. If it’s not something that your employer offers then start your own retirement account: a Roth IRA or a traditional IRA.

What Might All This Automatic Saving Look Like?

For simplicities sake let’s assume that your paycheck is currently deposited into your checking account to the tune of $1,000 every week. Now let’s assume that you don’t have an emergency fund yet and that your employer does not offer a retirement account, therefore you have decided to fund your own IRA. Also let’s assume you’re saving up for a new computer that you’d like to be able to pay cash for.

Since your weekly expenses are relatively low (about $400) you’ve decided to save a substantial amount of every paycheck. You want to put at least $200 every week into your emergency fund and you’d like to put at least $200 into your IRA as well. That leaves $200 after other weekly expenses and you’ve decided to put just $100 into it, leaving the rest as petty cash for you to play with throughout the week. You could set this up several ways. You could have the money deposited directly into your different accounts by your employer or you could put it into one account (such as your checking) and have it automatically transferred from there to your different savings accounts.

The advantage of having your employer Direct Deposit the amounts is that they should be able to support percentage based deposits. If you set it up this way then as your salary increases so will your savings, automatically. Check out this calculation I did from the retirement calculator over at Dinkytown.net.

As you can see from the calculator results if you save $800 a month from age 30 to 65 in an IRA account with a 10% average rate of return then you’ll have just over $3 million dollars in your IRA by the time you’re ready to retire. That’s not a bad amount, and keep in mind that is without ever increasing the amount you’re saving every month. Not to mention that if you are able to start saving before 30 you’ll be in an even better position.

Start Your Automatic Savings Plan Today

Don’t wait to get started. Set up whatever you need to and make your savings automatic. You’ll thank me for it. Trust me.

As a personal finance blogger I find it interesting to read other personal finance blogs not only to learn from these individuals but also to see how they perceive money and the world around them. You can always find links to some of my favorite finance blogs in my blogroll, but today I want to talk a little bit about a fantastic personal finance blog that has been around for a while now: MoneyNing.

I bring up MoneyNing for two reasons. The first reason is that David knows his stuff and he is committed to sharing with his readers what he’s learned from his own financial life. The second reason is that I’m actually being featured on his blog today with a guest post that I wrote about my journey to prosperity.

A Journey To Prosperity

For today’s post I’d like to expound a little bit more on the goals that I’ve set for myself on my journey to prosperity. Before you continue reading here you definitely ought to check out Debit and Credits Plan to Prosperity over at MoneyNing (clicking the link will open in a new window) and then come on back for some further clarification.

Ok. Did you read it? What did you think? Please if you have any comments related specifically to that article leave them over at MoneyNing. Otherwise let me help you understand a little bit more about my financial goals.

Being Rich Requires Thinking Rich

Like I mentioned over at MoneyNing I think that being prosperous is so much more than just being lucky. It requires hard work and dedication to achieve wealth. As an example let’s take a look at the worlds richest man, Warren Buffett. This is a man who has worked hard and smart every single day of his life. His wealth didn’t come easy to him, but because he was willing to learn and willing to work hard he’s been able to achieve extraordinary things. Being extraordinary doesn’t just come from hard work though, it requires some level of goal setting and follow-through. Think of it this way: If you want to be rich then you need to learn how to be rich.

I’ve set several goals for myself. Let me share them with you now, along with how I plan to achieve them:

• Be in a position to retire by the age of 55

I will contribute as much as possible to my 401k retirement plan. Currently this number is 10% of my income.
I will make smart financial decisions such as only buying a house that I can easily afford.

• Build my personal net worth to $1 million plus dollars

I will keep my liabilities (debt) to a minimum by buying only what I can afford.
I will make smart investment decisions to grow my net worth at a minimum of 10% a year.
I will continue to save money out of my paychecks beyond what I’m saving for retirement.

• Avoid debt as much as possible

I will not use my credit cards for everyday purchases unless I have the cash set aside to pay them off immediately.
I will not make foolish decisions and purchase things that I can’t afford with cash and that I don’t really need.
When I make large purchases (such as a house or car) I will compare my options and borrow as little as possible.

Those are the goals that I’ve set for myself; my roadmap to prosperity, if you will. Do you have a plan to achieve prosperity? I want you all to sit down and think about what you really want out of life and how you can achieve it. It might require some cutting back at first but in the long-run you’ll thank me, but more importantly you’ll thank yourself.

It’s hard to believe that the New Year is almost here. Christmas has now come and gone (along with Hanukkah) and we’re fast approaching the end of the year 2007. For me 2007 was a great year. I began truly getting my finances in order and building wealth. I’m by no means wealthy at the end of this year, but I am a step closer to achieving my goals. How did you do? Can you look back at the past year and know that you did well with your money? Did you begin an emergency fund (or completely fund an existing emergency fund)? Did you pay down any existing debt? Did you invest any excess money in the stock market or any other financial markets? What sort of returns did you make on your money this year? If you are the type of person who likes to own individual stocks, which companies did you purchase and how did they do? What sort of returns did you make on your retirement accounts? All flavors apply here: IRA’s, 401(k)s, 403(b)s, Roth IRA’s, SEP IRA. How did you do? If you didn’t have a retirement account at the beginning of the year did you start one and fund it this year?

I realize that I’ve asked quite a few questions, and honestly I could probably ask even more, but I think that’s good enough for now. I really want to know how you all did with your finances this year. I want to know, and I want to encourage you to do even better in the upcoming year. Will you do this? I hope so. I definitely plan to.. I know I’ve still a long way to go before I reach my ultimate goal of financial independence. Enough chatter though, let me highlight some of the goals and things that I did with my finances over the course of the year 2007…

At the beginning of the year 2007 my wife and I began a short-term savings account to save up for expenses such as college tuition, vacations, and a down-payment on a house. About midway through the year we expanded our savings by creating an emergency fund money market account. We have been funding this account with $250 every single month. We also opened a mutual fund (investing in gold and other precious minerals & metals) and a brokerage account. As of the time of this writing we have managed to accumulate between these four different accounts about $7,500 dollars. Most of this I money I prefer to think of as long-term, but it’s a start and it’s a cushion just in case we ever face an emergency.

We did pretty well this year I do believe. I want to do better next year, and I think we can. I also want to start focusing a little bit more on saving for a house, and also our retirement. I plan to open and fund an IRA for both my wife and I this coming year. So again I ask, what did you accomplish this year with your finances?

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