Every financial strategy can use an overhaul at least annually – and there is no better time to plan for the future than the start of the New Year.

Achieve a “Ten” on Your Savings Goals

How much out of each paycheck are you saving for fun and security? Common wisdom is that everyone should be setting aside at least ten percent of his or her monthly income – a figure that is above and beyond pre-tax retirement savings. To know how much to put aside, simply multiply .1 by your monthly take-home pay. Therefore, if your net income per month is $1,500, an appropriate savings goal is $150; if it’s $2,650, save $265.

What can hitting the ten percent mark do for you? First, it provides an important financial safety net. You can use the money for unexpected expenses that you may normally charge. Second, it can satisfy a desire to splurge. You may use a portion of it for something enjoyable, like a vacation or a luxury item. Third is the psychological benefit: while saving money, you know that you are doing what it takes to safeguard your future.

Enroll in your financial institution’s direct deposit program to have ten percent of your income automatically transferred from your checking account and into a savings or money market account.

Delete Consumer Debt

If you are carrying high-interest credit card and personal loan debt, make 2008 the year to get rid of it (or at least make a significant dent in the balance). In most cases, it’s just too expensive to keep. For example, a $5,000 balance with a 21 percent interest rate costs $87 in finance fees for the month. Since a typical minimum payment for a balance this size is $125, only $38 of it goes toward the principal! At that rate it would take decades to repay. Start a more efficient debt deletion plan today:

  • Rather than pay the minimum, determine a realistic and fixed amount you can pay each month. Never go below that figure.

  • Call your credit issuer and request a reduced interest rate. If they won’t budge, consider transferring the balance to a lower interest card.

  • Suspend credit use. It doesn’t make sense to add to your balances while repaying them. If you want to use plastic during this time, use your debit card.

How effective is this plan? Assuming you have that $5,000 balance, by cutting the 21 percent interest rate in half and making a regular flat payment of $445, you’d be debt-free in just twelve months.

Give Your Credit Score a Boost

If this is the year you will be in the market for a mortgage or vehicle loan (or any loan or line of credit), take steps to increase your credit score! In general, the greater your credit score and financial circumstances, the less risk the lender takes when loaning you money. The most common credit score is the FICO, which ranges from a low of 300 to a high of 850. A good score starts at around 650, but the higher it is, the better financial product you will likely be eligible for.

Hike up your score by:

  • Obtaining copies of your credit report from all three major credit reporting agencies to check for and correct errors.

  • Paying all loans and credit lines on time, every time.

  • Making sure any credit card debt you have is well below the credit limit.

  • Keeping older accounts active.

  • Repaying any collection accounts, judgments, and liens you may have.

  • Only applying for necessary credit. Having two to four active credit instruments is a good rule of thumb.

By taking immediate and positive action, you could see a dramatic difference in your credit score in as few as six months.

Make 2008 the year you save for goals and emergencies, eliminate expensive debt, and increase your credit score so you can borrow at the least possible cost.

1. Track spending to know where your money goes. Reduce or eliminate any unnecessary expenses.

2. Expect and prepare for emergencies. Aim for three to six months’ worth of expenses set aside in a liquid account.

3. Make sure you have the right insurance coverage. A major lawsuit, unexpected illness, or accident can be financially devastating if you lack proper insurance.

4. Communicate about family finances regularly with your spouse or partner, and any of your children you feel are old enough to be involved.

5. Do not try to "keep up with the Joneses." It’s a no-win game.

6. Take advantage of tax-deferred investments. If your employer offers a 401(k) or 403(b) plan, use it.

7. Pay for unreimbursed medical expenses and dependant care with pretax dollars using a flexible savings account. Check with your employer for availability.

8. Commit to always spending within your means. A line of credit should never be treated as an emergency fund or extra income.

9. Seek help from a financial professional. Great advice is out there; don’t be afraid to pursue it.

10. Keep a close watch on all of your accounts. Always be aware of your balances, and make sure fees and other transactions are correct.


Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence
by Joe Dominguez and Vicki Robin (
Penguin, 1999)

Your Money or Your Life was penned nearly ten years ago, however its wisdom has stood the test of time. Authors Joe Dominguez and Vicki Robin cover the emotional and practical steps you can take to gain control over your finances.

The book begins with the past, instructing you to take a good, strong look at what you’ve done with your money up to this point. From there, you will discover how to use every incoming dollar efficiently and according to your value system. The practicalities of personal finance are covered too, such as tracking expenses and developing a budget. The authors believe that by analyzing each purchase you make, you’ll be able to cut most of the waste in your budget. It’s all about “life energy” – what it takes to make money and the price you pay for misusing it.

Your Money or Your Life has a philosophical tone and therefore stresses the concept of financial fulfillment. Dominguez and Robin really want you to think about the deeper reasons you do everything concerning money, including the job you take, your spending choices, the way you save and invest, and every other economic decision you make.

Another idea the book emphasizes is the importance of giving back and using your money for good in your community. Again it’s about fulfillment, and getting the most reward from your hard-earned income.

Your Money or Your Life concludes with sound investment techniques, so you can build wealth and enjoy a retirement free of financial hardship. Its positive approach may motivate you to make at least a few wise changes to the way you handle money.
Copyright © 2007 CCCS
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