2008 Financial New Year's Resolutions

Time for a Financial Review

1. Automate your financial life. If it’s not easy, you're not likely to do it.

Make it easy by using a either a secure online budgeting system, like Mvelopes Personal, or a personal financial software program such as Quicken or Microsoft Money to track and categorize your expenses.

Use an online bill paying service to save time and money and also to ensure your payments are made and received on time.

2. Create a spending plan. Determine how much you plan on spending, and where it will be spent. Give yourself some flexibility to allow for occasional impulse buys without ruining your overall budget.

3. Save at least ten percent of your income. The more the better. If you don’t pay yourself first, there won’t be any left over to save. Set up an automatic transfer to a savings account or mutual fund to make it easy. If you don’t see or get your hands on the money it will be more likely to make its way into your savings plan.

4. Devote as much of your income to pay down credit card debt as you can, but at least pay the minimum. Making at least the minimum payment on time accounts for 35% of your credit score. Paying off the entire balance each month can save you hundreds in interest.

But even paying credit card debt down an extra $50 or $100 a month will save thousands and cut years off the loan. Use the debt reduction modules in personal financial software programs such as Quicken or Money to set up a plan to get you out of debt within the next 5 to 7 years.

5. Contribute enough to your 401(k) to get the maximum company match. Your kids can get help to pay for college, but no one will help pay for your retirement. If you’re not taking advantage of a company match,you’re turning down a yearly bonus from your employer, as well as the tax sheltered growth of that money.

6. Review and readjust your portfolio. Make sure that no single stock comprises more than five percent of your portfolio. As your different investments perform differently, your distribution will become skewed. Readjust your holdings to match your desired distribution.

Even better, stay away from individual stocks and set up a no-load mutual fund portfolio. There are many advisory services such as Morningstar or financial magazines like Forbes and Kiplinger's Personal Finance that rate funds and suggest portfolios based on your personal financial situation.

As a matter of fact, I would strongly urge you to subscribe to one of these magazines to better understand the economy and investing.

7. Start an emergency fund. You should have enough money set aside to cover three to six months’ worth of expenses, such as mortgage, food, car payments and other necessities. This money should be kept in a money market fund that is easily accessible. Keep it separate from your other funds and avoid spending it.

8. Check your credit reports. You’re entitled to one free copy of your credit report from each of the three credit-reporting agencies at your request. Stagger the reports, receiving one every four months to keep an up-to-date view of your credit throughout the year. See Your Credit Report for information on how to do this.

9. Review your life, health, home, auto and disability insurance policies and update them if necessary. Make sure you have replacement cost coverage on your home, as well as good liability coverage. Make sure your home insurance reflects the current value of your home.

If you have assets to protect, buy an umbrella policy so that in combination with your auto and homeowners liability coverage you have at least $1 million in liability protection.

10. The Federal Reserve has been keeping interest rates artificially low in an effort to ward off a major financial melt-down due to the collapse of the sub-prime mortgage market and to appease the characters on Wall Street responsible for the mess.

This means that mortgage rates will remain low for the time being, but that there is a very real possibility of a recession, if we are not already in one.

In the meantime oil prices are soaring, the dollar is falling and the stock market is sputtering.

Your personal finances take time and attention. If you ignore them now, you will have many years to suffer in leisure when it comes to retire.

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