|
Happy New Year! A perennial favorite resolution for every new year is about building wealth. Here are some tips to help you make and keep the resolution you've made to improve your finances.
Use these resolutions to stay On Course for 2010! See you next month!
 -Jennifer Lane, CFP |
| Building Wealth - Your Money Resolutions
Track your expenses, reduce your debt, and save and invest. |
Track your expenses to help grow your nest egg
Make this the year that you keep track of your expenses. What you'll find may surprise you, and it will definitely make you richer. Tracking your money doesn't need to be time consuming. Try the budget tools at Mint.com or Yodlee.com for an automated way to watch your accounts.
- Knowing your lifestyle costs now helps build a sensible retirement nest egg target and makes planning savings easier and more accurate.
- Once you see where your money is going, you're sure to find areas that are less important to you than your longer term goals like retirement or college saving. Reduce these extra expenses and set-up an automatic investment to redirect those funds to your investments where they'll do you more good.
Credit: This is the year
You don't need to be saddled with a huge credit card balance to be hit hard by the new credit card rules that take effect in February. Prompted by the economy and the upcoming consumer friendly rules, many banks are changing the way they work with their customers.
- Watch your mail for notifications about changing interest rates, modified payment terms, and tightened credit limits. Pay down your balance twice monthly - after each payday - to avoid reaching a balance that is greater than 30 percent of each card's credit limit.
- If you're carrying a balance, stop using the card. Now that you're expense tracking, redirect more dollars toward getting it paid down or paid off completely. Don't be discouraged if you only have a little extra to put towards your payment. Dollars are like snowflakes: individually, their effect is small, but cumulatively they can add up quickly.
Save and invest: Get focused and stay focused
Your year-end account statements are probably a little easier to look at this year, but even if they're doing well it's still time for a review. Make a date now to review your accounts once a quarter, on your own or with your investment advisor or broker.
-
Make sure you know what you have and how it's faring.
-
Consolidate accounts if you have unwatched retirement plans from previous employers or small IRAs that can be consolidated into one account. Reducing the number of accounts can help minimize costs.
-
Minimize trading costs by investing in a no-transaction fee fund. Or, if you're concerned about cash flow, try directing your monthly deposits into a money market account, then invest those dollars once a quarter into your investment. Check online at BankRate.com for information about banks that are paying the highest interest. |
| Q&A
Q: For the past 8 years, my parents have given my two girls saving bonds for college. Should we keep the savings bonds or cash them in towards an investment, like our 529 plan? -- Ivylee, a NECN viewer from Natick
|
A: Savings bonds are a great gift towards college. They grow tax deferred, and when you cash them in to pay qualified school costs, they could be tax-free. Whether or not to cash them now depends on your financial situation. In general, assets in the child's name - like the bonds - are counted at a higher percentage against financial aid eligibility than assets in parent's name - like the 529 plan. At the same time, the savings bonds are safe from the fluctuations in the stock market, which hurt some 529 plans recently.
Why not keep the bonds you have so far and give your parents the option of contributing to the 529 plan in the future? SavingforCollege.com is a great web site to research and compare 529 savings plans. |
| What's New
The Newton Needham Chamber of Commerce has asked Jennifer to contribute a financial column to their monthly newspaper. |
| |
|
Compass Planning Associates helps families, individuals, and small-business clients achieve financial security, knowledge, and control over their money. Our fee-only, client-centered approach provides education and guidance for achieving financial goals and dreams.
All contents of this newsletter Copyright 2010 Compass Planning
| |
|
Jennifer's Hint
If you focus on saving and investing for retirement when you are young, you'll give yourself an advantage if you later want to reduce the pace during the high-cost childrearing years. Having a savings focus will also help avoid building a lifestyle that takes your entire paycheck to maintain.
Get more tips in Jennifer's book
(click for link)
|
|
|
