Published January
2004
Time
for New Year’s (financial) resolutions
Now
that it’s officially 2004, it’s time to make (and hopefully keep) some
New Year’s resolutions. What are yours? Lose weight? Volunteer more? Quit
smoking? Spend more time with your family?
All these are worthwhile
goals. But, while you’re in the resolution-making frame of mind, don’t
forget your financial resolutions. Here are some to think about:
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Cut your debt load. If you feel overburdened by debt, you’re not
alone. At the beginning of 2003, American households owed, on average,
nearly $9,000 on all credit cards, according to Cardweb.com, a Web site
that provides credit card information to consumers. This figure is up
173 percent over the past decade. You’ll find it very hard to achieve
your financial goals if you’re overburdened by debt. Set a realistic goal
for whittling down the amount you owe. And avoid taking on unnecessary
new debts through more credit card purchases.
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Increase your retirement savings. Put in as much as you can afford
to your IRA and your 401(k) or other employer-sponsored retirement plan.
These tax-advantaged accounts are great ways to help boost your retirement
savings.
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Put bonuses and salary increases to work. Consider investing your
bonuses and salary increases. If you don’t really need the additional
money to meet your basic needs, you can put it to work helping you build
your investment portfolio.
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Avoid tapping into your investments. Try to build an “emergency”
cash cushion of about three to six months’ worth of living expenses. Once
you’ve established this fund, you won’t need to tap into your investments
to pay for major car repairs, new appliances or any other unexpected costs.
And by giving your investments the opportunity to grow as long as possible,
you can accelerate your progress toward your long-term financial goals.
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Diversify your portfolio. By spreading out your dollars over a
wide range of assets — stocks, bonds, government securities, etc. — you
can help cushion the impact of a downturn that may affect just one particular
area. By owning many different investments, you give yourself a better
chance to succeed.
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Keep emotions out of investing. There’s plenty of evidence that
fear and greed drive the market. Don’t be ruled by your emotions. If a
stock is falling, you don’t have to join the selling stampede, especially
if the company still has good prospects. Conversely, don’t chase after
“hot stocks” — they may already be cooling off by the time you buy.
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Protect your family. Thoroughly review your insurance coverage
and make sure it’s sufficient to meet your family’s needs should something
happen to you.
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Check your beneficiary designations. If you’ve gone through any
significant changes in your life — divorce, remarriage, stepchildren,
etc. — you’ll want to make absolutely sure your beneficiary designations
on all your financial documents are up-to-date and correct.
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Boost college savings. If you have a child, it’s never too soon
to start saving for college. Consider opening a 529 plan or a Coverdell
Education Savings Account.
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Rebalance as needed. As your needs, goals and personal situation
evolve over time, you’ll want to adjust your portfolio. Your investment
professional can help you make the appropriate changes.
By following through
on these resolutions, you can make great strides toward improving your
financial situation in 2004 — and in all the years to follow.
Eric Cumley is an
investment representative with Edward Jones Investments at 1201-C SE Everett
Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is
an NYSE-member investment firm with more than 8,000 locations nationwide.
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