Financial Check-Up

Posted on February 12, 2009 by

0


Odds are that you made all sorts of resolutions on January 1, 2009. Many people wanted to lose weight, some promised to quit smoking, while others made an oath to correct the financial wrongs of yesterday.

Since we are now almost half way through February, now is a good time to review your financial resolutions to see if they have gone down the drain as in years past, or if you’re making progress toward your goals.

  • Have you paid for your holiday 2008 purchases? If not, and you’re still charging, your debt is growing faster than the national debt. (Honestly, the government borrows money cheaper than consumers can.)

Why bother? Paying off credit card debt is one of the smartest moves you can make. With credit, you promise to repay debt with income you have yet to earn. Thus, having no debt provides freedom to use future income as you see fit. You can use the money as you please, choosing to invest or save, or earning interest instead of paying interest. It also lowers your credit utilization ratio which improves your credit score.

Have you set up a financial center at home? It doesn’t matter if it’s a shoebox or a full-blown home office. The point is that you have an area where you keep all financial records and can easily put your hands on what you need when you need it.

Why bother? Late fees are in the $40 range, so paying a bill late is like throwing money out of the window, not to mention the negative ding to your credit report.

  • Do you review your credit report several times each year? Now that you can obtain your credit report free of charge every 12 months from each of the major bureaus, these’s no excuse for not doing it. However, a 2008 National Foundation for Credit Counseling-MSN Money Financial Literacy Survey revealed that only a minority of Americans had ordered their credit report.

Why bother? Reviewing your credit report is a sure-fire way to spot identity theft and fraud. Further, the information obtained in the report needs to be about you and only you. If inaccuracies are revealed, they need to be dealt with swiftly, as your credit report strongy influences the powerful credit score.

  • Do you know your credit score? No, the score does not come with the free credit report, but the few dollars you spend to purchase it will be money well-spent.

Why bother?  Your credit score dictates what the interest rate will be on loans and credit cards, or whether you’ll be extended credit at all. A difference of just 100 points can translate into tens of thousands of dollars in interest payments over the life of a loan. The National Foundation for Credit Counseling-MSN Money Financial Literacy Survey found that one-third, or roughtly 72 million adults, readily admit they do not know their all-important credit score. Get your score and take the necessary steps to improve it.

  • Have you established an emergency savings account? Americans are notoriously lousy savers. Once again, the Survey showed that roughly 76 million adults say they do not have any savings outside of those designated for retirement.

Why bother? Without adequate savings, you are just one flat tire, or one trip to the emergency room away from financial distress. Financial experts agree that it is prudent to have between three and six months income socked away in a liquid, interest-bearing acount. If money’s tight, it’s even more important to have a rainy day fund. Start small by putting 10 percent of each paycheck into savings, and then forgetting it’s there. At the end of a year, you’ll have a little over one month’s income saved; creating a welcome safety net you didn’t have before.

  • Are you contributing the maximum into your retirement plan at work? More than one-quarter of Americans are not saving anything toward retirement, according to the NFCC-MSN Money Survey.

Why bother? Time is money’s best friend, thus the sooner you start saving for retirement, the larger that nest-egg will grow. Many seniors have had to postpone retirement due to being ill-prepared. If this is not how you envision your golden years, then start now by contributing to your retirement plan at work. Starting small is better than not starting at all, particularly if the company will match your contribution.

If you’ve gotten off track with your financial resolutions, now is the time to do a check-up and get back on track. There is nothing to be gained by delaying. The above represents the basics. Implementing these financial musts will lay the foundation of a sound financial future.

For professional help getting started, come see one of our trained and certified consumer credit counselors. They work with people like you everyday. Let us point you toward financial stability.

Advertisements