Looking for strategies to improve your finances during 2003? Consider the following suggestions from Tips From The Top: Targeted Advice From America's Top Money Minds, a new book containing suggestions from 110 different financial advisors:
· Make financial goals SMART: Specific, Measurable, Achievable, Realistic, and Tangible. Write them down and track your progress regularly. · Think positively. A positive attitude is an important resource for achieving financial goals. Believe in yourself and your ability to take actions that will improve your financial future. · Diversify away from a company stock whenever possible. Remember that your paycheck and benefits are already dependent upon the performance of your employer. · To see how fast it takes for savings to double, use the Rule of 72. Divide the expected interest rate into 72 to determine how long it takes for a sum of money to double (for example, 72 divided by 8% interest = 9 years). · If you are retired, maintain an allocation to fixed-income investments that can cover five to seven years of living expenses in excess of benefits provided by pension income and Social Security. · If you have limited money to invest and want broad diversification, purchase total stock market and/or total bond market index funds. · Establish criteria for selling a stock before you buy it. For example, you might place a stop loss order at a price 20 to 25 percent below the purchase price and a sell order at a predetermined price (e.g., 10% or 20% gain) above the purchase price. · Plan wisely when purchasing long-term care (LTC) insurance. Social Security and/or other retirement income will continue when you are in a nursing home or need home health care and will cover part of the cost. Therefore, only insure the amount that you can't handle. · Remember the number 4.5%. If you are retired and your portfolio is invested at least 50 percent in equities, plan on withdrawing between 4% and 4.5% during retirement. · At the beginning of each year, mark your paydays on a calendar and identify the months with "extra" paydays. If you are paid weekly, there are four months with five paydays. If you are paid biweekly, there are two months with three paydays. Monthly expenses usually don't increase much in these months, so use the "extra" income to increase savings or reduce debt. · Every future raise you get, contribute half to your 401(k) plan and keep the other half as a pay raise. Saving half of a 4% raise in salary, for example, will increase your 401(k) savings by 2%. As soon as your raise is effective, have that amount deducted from every paycheck and added to your investment portfolio. · After you make your final car payment, pay yourself the amount you've been paying the bank monthly. When your car is ready to be replaced, you'll have a nice down payment ready for a new car and will need to borrow less. · Every time you break a bill and receive change back, throw the change into a jar and forget about it. Every month or so, count the change, wrap it, and make a deposit into savings. · Teach children about money management by sharing how financial decisions are made. Vocalize your thought process so that your child can hear things like, "I like this a lot, but I really don't need it, so I won't buy it." · Check your credit reports regularly to spot identify theft. Those who don't check their credit reports regularly don't discover that they've been a victim for an average of 15 months. Check your report carefully for unfamiliar accounts and inquiries.