Consider the start of the 21st century a good reason to fine-tune your finances. Here's a simple plan.
Many of us make new year's resolutions with good intentions, only to see our plans fizzle. The FDIC can't advise you on how to eat better or exercise more, but we can suggest ways to get your finances in shape. And, we think your chances for financial success will be better in 2000 if you start with a simple plan and the attitude that it's a new you for the new millennium.
FDIC Consumer News has put together the following tips to help get (or keep) your financial house in order. We deliberately kept
our list short and our advice manageable.
"If you want to be successful—to make progress with your financial resolutions by year's end—a plan shouldn't be too broad or too demanding," says Mike Turpenoff of the FDIC's Office of the Ombudsman in Washington. "Most financial consultants will tell people that even basic, easy-to-take steps can improve personal finances without using a lot of time and energy."
Here's what we suggest you consider:
1. Organize your financial records.
Start by sorting your financial and legal papers into categories for easy reference.
Information about your savings accounts (checking account, certificates of deposit, etc.) and investments (stocks, bonds, mutual funds and the like) could go into one "savings and investment" portfolio.
Outstanding bills could go into another folder that's easy to remember and find. Documents such as mortgage papers and old tax returns could go into yet another file. It also helps to label your files clearly and even put them in alphabetical order.
To further save time and reduce confusion, shred and toss away old bills, canceled checks, and other documents that have no real use for tax or other purposes. (For example, most people probably only need to keep old tax returns and canceled checks for seven years. You may want to discuss specifics with your attorney, accountant or another advisor.)
Arranging and updating your files also will help your family locate important documents, such as wills and insurance policies, in an emergency.
2. Find ways to spend less and save more.
Here's one easy way to get started. On one side of a piece of paper, jot down ways you might be able to reduce your expenses. (Examples: "Eat out less." "Carpool to work instead of driving alone.") On the other side, mark down ways you can increase income. ("Work overtime once in a while." "Have a yard sale.") Give this some serious thought, and try to identify the ideas that seem most likely to work for you.
After you begin reducing expenses and earning more money, take a large chunk of that extra cash and put it into savings accounts and, if possible, into investments. "Many financial consultants tell their clients to consistently save money on a defined schedule—even if it's only $5 a week," says Turpenoff. "You may be surprised how fast savings will grow when you save a specific amount on a specific schedule."
Good examples of your savings or investment options:
- Federally insured, interest-earning accounts at banks, savings and loan associations, and credit unions.
- Payroll deduction programs offered by your employer that enable you to invest in U.S. Savings Bonds, tax-deferred retirement accounts (typically through mutual funds), or other savings or investment plans.
Remember: Only deposits are insured by the FDIC or, for credit unions, the National Credit Union Administration. Investments are not protected by the government against loss.
3. Choose and use credit cards carefully.
First, shop around for a good deal. "All credit cards are not created equal," says Kathleen Nagle, a Senior Consumer Affairs Specialist with the FDIC in Washington. "There may be substantial differences in interest rates, fees, grace periods and other terms." In general, if you expect to carry a balance on your card most months, try to find one with a low interest rate (also known as the Annual Percentage Rate or "APR").
You also have to manage your credit cards responsibly. Some suggestions: Try to pay all or much of your credit card bill each month. While it might be tempting to pay only the minimum monthly payment, you're simply taking more time to pay off your debt and paying far more (perhaps thousands of dollars) in interest charges.
You may be able to reduce the amount of interest you pay by consolidating several credit card debts into one or two cards that offer a low interest rate.
To avoid paying extra fees, pay your bill on time and never exceed your credit limit. For more about your card's fees and rules, see your card contract or speak to a customer service representative from the card issuer.
Final Thoughts
Some people may have serious debt problems, for any number of reasons. They especially need to have a reasonably accurate idea of their expenses and a plan for better reducing their debts.
If you've got serious money management troubles and you can't solve them on your own, consider enlisting the help of your banker, lawyer or accountant. There also are respected organizations that, for free or at low cost, advise people with debt and budgeting problems, and even help negotiate repayment plans with lenders.
To find a legitimate debt counselor—and avoid "credit repair clinics" that charge excessive fees for questionable services—start by contacting your local government's consumer affairs department or a nearby Better Business Bureau.
If you follow a good number of our suggestions, we'll offer one more bit of advice. Congratulate yourself. You should feel better knowing that you've done some simple things that could dramatically improve the way you manage your personal finances.
