Monthly Finance Message:

Year-End Financial Fitness Tips

December 2007

Barbara O'Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers NJAES Cooperative Extension

Season's greetings and best wishes for good health, happiness, and financial security throughout the upcoming year. Around this time, newspapers and magazines are full of advice and suggested New Year's resolutions. In addition, many people take stock of their lives and vow to do better in the future. Want to improve your personal finances? Below are 10 financial strategies which can serve as New Year's resolutions for 2008:

  1. Design a financial plan. A financial plan is a blueprint that guides your decisions so you can do the most with what you have. To get started, list your goals and objectives. What do you want to accomplish in 1 year? Within 5 years? In 5 years or longer?
  2. Learn the basic skills of budgeting. Budgeting sets saving and spending boundaries. Keep track of your spending for a month or two and use this information to organize your budget categories. As part of the budget, set up automatic saving and investing plans for goals such as college and retirement.
  3. Prepare a net worth statement. Net worth is the difference between what you own (assets) and what you owe (debts) and shows where you stand financially at a particular point in time. An overall financial goal should be to increase your net worth each year until retirement.
  4. Harness the power of compound interest. If interest compounds more than once a year, the effective annual yield will be higher than the annual interest rate. The more frequent the compounding intervals, the higher the effective annual yield. To calculate the number of years that it takes to double a sum of money, divide 72 by the interest rate (example: 72 divided by 8% = 9 years).
  5. "Pay yourself first" as if savings were a monthly bill. To achieve future financial goals, view those dollars as money that isn't available for current expenses. Direct deposit your paycheck so that your money is put to work immediately. Save the extra money that is freed up after making a final car payment or when you receive a pay raise.
  6. Question your motives before you spend. Ask yourself "Do I really need this?" Postpone a purchase for a day, or even a week, to decide how badly you need it. By deciding "no" more often, you will reach your financial goals sooner. When you do purchase a product or service, follow the "Rule of Three" and ask for price quotes from three different stores or professionals.
  7. Maintain a good credit history. Check your credit report annually from the central site that allows consumers to request free credit reports from the three major credit bureaus (Experian, Equifax, and TransUnion): www.annualcreditreport.com.
  8. Consider mutual funds for long-term financial goals. Mutual funds allow investors to contribute small amounts of money, get immediate diversification, and match their personal investment objectives with fund objectives. The primary objective of stock funds is growth with income as a secondary factor.
  9. Take asset allocation and rebalancing seriously. Asset allocation is how you split you money between stocks, bonds, money market funds, and other assets. The heart of asset allocation is keeping your portfolio focused on the target allocation and rebalancing when the target weightings shift.
  10. Prepare important estate planning documents. These include legal tools such as a will, living will, power of attorney, and health care proxy. The best time to do estate planning is when you're feeling healthy, not during some type of crisis. Remember that everyone has an estate plan. It can be either one that they prepare themselves or one established by their state of residence. The choice is yours.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences