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Cents and Sensibility Guy Steele |
Time for New Year’s
money resolutionsNow that it's 2004, it's time to make some New Year's resolutions. What are yours? Lose weight? Volunteer more? Quit smoking? Spend more time with your family?
All these are worthwhile goals. But, while you're in the resolution-making frame of mind, don't forget your financial resolutions. Here are some to think about:
Cut your debt load. If you feel overburdened by debt, you're not alone.
At the beginning of 2003, American households owed, on average, nearly $9,000 on all credit cards, according to Cardweb.com, a Web site that provides credit card information to consumers. This figure is up 173 percent over the past decade.
You'll find it very hard to achieve your financial goals if you're overburdened by debt. Set a realistic goal for whittling down the amount you owe. And avoid taking on unnecessary new debts through more credit card purchases.
Increase your retirement savings. Put in as much as you can afford to your IRA and your 401(k) or other employer-sponsored retirement plan. These tax-advantaged accounts are great ways to help boost your retirement savings.
Put bonuses and salary increases to work. Consider investing your bonuses and salary increases.
If you don't really need the additional money to meet your basic needs, you can put it to work helping you build your investment portfolio.
Avoid tapping into your investments. Try to build an "emergency" cash cushion of about three to six months' worth of living expenses.
Once you've established this fund, you won't need to tap into your investments to pay for major car repairs, new appliances or any other unexpected costs.
And by letting your investments have the opportunity to grow as long as possible, you can accelerate your progress toward your long-term financial goals.
Diversify your portfolio. By spreading out your dollars over a wide range of assets -- stocks, bonds, government securities, etc. -- you can help cushion the impact of a downturn that may affect just one particular area. And by owning many different investments, you give yourself a better chance to succeed.
Keep emotions out of investing. There's plenty of evidence that fear and greed drive the market. Don't be ruled by your emotions.
If a stock is falling, you don't have to join the selling stampede, especially if the company has good prospects. Conversely, don't chase after "hot stocks" since they may already be cooling off by the time you buy.
Protect your family. Go over your insurance coverage to ensure it is sufficient to help your family meet their needs should something happen to you.
Check your beneficiary designations. If you've gone through any significant changes in your life -- divorce, remarriage, stepchildren, etc. -- then you'll want to make absolutely sure your beneficiary designations on all your financial documents are up to date and correct.
Boost college savings. If you have a child, it's never too soon to start saving for college. Consider opening a 529 plan or a Coverdell Education Savings Account.
Rebalance as needed. As your needs, goals and personal situation evolve over time, you'll want to adjust your portfolio. Your investment professional can help you make the appropriate changes.
By following through on these resolutions, you can make great strides toward improving your financial situation in 2004, and in all the years to follow.
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Guy Steele is a financial planner and head of the Pali Palms office of Edward Jones. Send planning and investing questions to him at 970 N. Kalaheo Ave., Suite C-210, Kailua, Hawaii, 96734, or call 254-0688