Take steps to keep New Year's vows

MONEY NOTES

January 03, 1993|By Knight-Ridder News Service

Have you given much thought to making a New Year's resolution for 1993?

A lot of folks, no doubt, will resolve to manage their money a bit better. It's one of the most popular promises made each Jan. 1, second only to a vow to lose weight, according to a Gallup poll.

But nearly 80 percent of the people who make a New Year's pledge eventually break it, often in the first few weeks.

Many fail because they don't prepare for success, said John Norcross, a psychology professor at the University of Scranton, who recently finished a two-year study on a related topic.

Those who keep their resolutions seem to follow three basic steps -- preparation, action and maintenance -- he said.

Here is how you might apply that three-step process to your financial affairs:

* Preparation: This step should be taken before a specific pledge is made. Start by sitting down with a paper and pencil to figure out exactly where your money is going. As strange as it may seem, many people really don't know how their money is spent.

Make a list of all fixed expenses you can't control, such as the amount of your mortgage, car payment and basic telephone bill. Make a second list of expenses you can control, such as credit-card bills, long-distance phone bills and entertainment expenses.

Once you know where your money is going, you'll have a better idea of how much you can reasonably expect to save, or what expenses you can afford to cut.

* Action: Set a specific goal. It's not enough to simply say you want to save "more" in '93. It would be better to say, for example, that you want to save $200 a month.

Once your goal is in place, you may need to adjust certain behaviors, lest you return to old habits.

"For recreation, take a walk through the park instead of the mall," Mr. Norcross said. "You'll get some fresh air and be less tempted to spend money. Willpower alone is overrated in the resolutions process."

* Maintenance: This may be the most important stage of all, and it should begin almost immediately.

Monitor your progress. If you promised to save, say, $200 a month, then you should have at least $50 after the first week, $100 after the second week, etc.

Keep track of your failures, too. If you stray, look for the reason or reasons why you failed, then make adjustments.

A resolution is not a 100-yard -- through January, Mr. Norcross said. Rather, it should be a marathon that lasts the entire year.

*

Sooner or later, it will happen to about one of every four working-age adults:

Somewhere between raising a family and planning for retirement, these adults will be called on to care for an aging parent.

To prepare for that possibility, both sibling and parent should first sit down to discuss financial matters, says James H. Weber, president of the Pennsylvania Institute of Certified Public Accountants.

"Encourage your aging parents to review their current resources and how they plan to pay for housing, food and health care during their golden years," he said.

Children should ask about their parents' pensions, retirement accounts, home equity and investment assets, he said. They also should know about any life-insurance policies that might be tapped for emergency cash.

By asking some tough questions, the family can try to estimate how long the parents' assets will last, given current spending habits. Members also can identify resources that may be needed during a sudden illness.

"It's also wise to consider how their financial property will be managed and distributed if they become incapacitated or incompetent," Mr. Weber said. "It's important for your parents to designate a friend, relative or professional adviser to represent them if they become incompetent."

*

With tax season almost here, you may be tempted to call the IRS hot line (800-829-1040) for some quick answers. If you do, try your luck during early morning or late afternoon.

Each year at this time, the agency is swamped with frantic taxpayers preparing to file their tax returns, said Joan Schafer, an IRS spokeswoman in Philadelphia.

Though the phone lines are open Monday through Friday from 8:30 a.m. to 4:30 p.m., most people call at about the same time -- during the peak business hours in the middle of the day. That creates an incredible jam, and most callers get nothing but a busy signal.

Try calling on Tuesday, Wednesday or Thursday, from 8:30 a.m. to 9:30 a.m. or from 3:30 p.m. to 4:30 p.m.

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