Financial fitness

Your Money

January 04, 2004|By Lorene Yue

There's nothing like the dawn of a new year to spur people to get their financial house in order.

This is not surprising to financial planners, who field numerous phone calls this month from individuals determined to get their dollars in order.

"Probably the most things people think about are weight loss and financial planning," said Richard Busillo, president of RTD Financial Advisors Inc. in Philadelphia. "I can't help with the first one, but I can with the second."

While not everyone will need to start from scratch, money managers recommend that consumers give their finances a good tune-up at least once a year.

January is a good time, since end-of-the year statements start to roll in for mutual funds, bank accounts, retirement plans and wages. Busillo recommends gathering all that information and using it as a starting point.

There's no need to do a complete overhaul in one day. A few steps can help get you in shape.


Put all financial records, credit-card receipts, insurance policies and investment statements in one place. If they aren't, then head to an office supply store, get some folders and set up a system that makes everything easily accessible. That avoids the great paper shuffle when it comes to hunting down personal financial information.


Clean up your credit. Take stock of your credit-card debt. Check interest rates. Try to pay down any debt being carried on a high-interest-rate card immediately or try to transfer the balance to a card with a lower fixed-rate interest. Ask your-credit card company if they'll give you a lower interest rate; if not, shop around. Order a credit report. Financial experts recommend checking your credit record for errors at least once a year.


Calculate your net worth. Having a sense of what you are worth and what your expenses are can help you set financial goals. Total up the value of your material possessions -- home, vehicles, value of life insurance policies, pensions and other investments -- and then deduct all debt and taxes that will have to be paid on any investments once cashed. The remainder will provide a better benchmark of where you should start in setting savings goals.


Review your investment portfolio. The stock market had a fairly good run in 2003, so chances are your portfolio could use some rebalancing. Stocks for small-cap companies and real estate investment trusts performed strongly last year, which means many investors could be overweighted in those industries. Take a good look at your holdings and make sure they are still in line with your overall investment goals.


Evaluate life and homeowner's insurance plans. Many people overlook the value of life insurance because they are covered through work. What if you lose your job and you've been there for 20 years? "Then you'll be older and the cost of insurance will be more expensive," said Jim Daniels, a Chicago investment representative for Edward D. Jones & Co. As for homeowner's insurance, some people forget to increase their coverage limits after making a major home renovation to cover the costs of the upgrade.


Put together an estate plan. There's nothing worse than having family members scrambling to figure out your finances when they should be grieving, financial planners said. Create a will, check that beneficiary lists are up to date and let your family and spouse know where you stash all your financial information so they can find it.


Buy a paper shredder. Incidents of identity theft are on the rise, so don't neglect to properly dispose of credit-card receipts, bank statements, checks and even pre-approved credit-card mailings. After getting those financial affairs in order, the last thing you want to happen is have someone else set you back

Lorene Yue is a staff writer for Your Money

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