Five Smart Money Moves For the New Year

Barbara Marquand | guest writer for GoTalkMoney

The dawn of the new year is an ideal time to give your finances a fresh look. Here are five things to put on your financial to-do list:

1. Take Stock of Your Retirement Investments

It's never too soon to think about saving for retirement, and it's never too late to start planning. And if you're in your 50s, now is a good time to take stock of how much you've saved so far and how much further you need to go. Add up how much you have in 401(k)s, IRAs, and annuities, and project conservatively how much these will grow by the time you retire. Get a Personal Earnings and Benefit Estimate Statement from Social Security, and add in any other income, such as pensions.

Most experts say you'll need 70 percent to 90 percent of your pre-retirement income to keep up your standard of living during retirement. Compare your retirement income projection, based on your current investments, to how much income you'll need and calculate how much more you should save.

Talk to your financial advisor about the right investment mix, and don't short yourself on cash investments. Shop for the best CD rates and best savings account rates to get the highest rates of return.

2. Pay Down Credit Card Debt

If you're like many consumers, your credit card interest rates went up in 2009 as credit card issuers scrambled to raise rates before the new federal credit card reform rules becomes effective in February 2010. Focus on paying down the highest interest rate cards first, and avoid adding more charges. If you're thinking about transferring high-interest balances onto a card with a lower rate, beware of balance transfer fees. Generally, it's better for your credit score to pay down the cards than move debt around.

3. Tame Compulsive Spending

If you're having a hard time making ends meet, track your spending for a month. Write down all of your expenditures and see where your money goes. You may be surprised to learn how much you're throwing away on pointless items. Look for trouble spots and set goals for cutting back. Pay yourself first to curb spending. Set a monthly savings goal and have that money automatically deducted from your checking into a savings account each month--before you have a chance to spend it.

4. Establish or Boost Emergency Savings

Although Americans increased their savings rates in 2009, most still reported not having enough savings to support themselves for more than three months if they lost their jobs, according to a recent survey by HSBC Bank USA. Even more disturbing: More than a third didn't have enough savings to support themselves for one month if they became unemployed.

If you already have an emergency savings fund, evaluate whether you should add to it. Financial experts recommend setting aside enough to cover your basic living expenses for at least three to six months. Given the length of the recession, some now suggest emergency saving funds to cover a full year.

Deposit emergency savings money in savings accounts and money market accounts as well as short-term CDs. Avoid long-term CDs for emergency funds, because you pay a hefty withdrawal penalty if you take your cash out early. Shop around for the best interest rates.

5. Set a Realistic Budget

Take a hard look at your expenses, calculate your income, and set a budget that takes into account your goals for retirement and other savings. Even if you already have a written budget, it's a good idea to give it a fresh look periodically to make adjustments.



HSBC Bank • HSBC Survey: Americans Saving More But Still Not Enough • Sep 03, 2009 • Yahoo! Finance: http://finance.yahoo.com/news/HSBC-Survey-Americans-Saving-bw-1177048108.html?x=0&.v=1

Employee Benefit Research Institute • How to Stay Disciplined with Your Savings • ChoosetoSave.org: http://www.choosetosave.org/tips/index.cfm?fa=display&content_ID=3533

National Foundation for Credit Counseling • NFCC TIPS FOR CONSUMERS ON SPENDING WISELY • http://www.nfcc.org/FinancialEducation/consumertips/SpendingWisely.cfm

Mary Beth Franklin • The Basics: How Much Do You Need? • MSN MoneyCentral: http://moneycentral.msn.com/content/Retirementandwills/Createaplan/P142702.asp

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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