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Top 10 Tips To Improve Finances


After 15 years of gathering information for Kentucky Living’s Money Matters column, I’ve found that most people make the same mistakes year after year by not paying attention or not being totally involved with their finances.




Here are some tips that slowly but surely will improve your financial situation.




1 Establish a financial plan. Ask yourself what you want to accomplish in the short and long term and set goals. Then develop a strategy to have the funds available for these goals when you want and need them.




2 Max out your IRA. Individual retirement accounts aren’t just for retirement. For example, with a Roth IRA, you can withdraw the money anytime and use some of it for college tuition or toward the purchase of your first house.




With your company 401(k), your money grows quickly with tax breaks, and many employers match your contribution. But don’t put more than 30 percent of the 401(k) into stock of the company where you work, says Dee Lee, co-author of The Complete Idiot’s Guide to 401(k) Plans. Remember what happened at Enron.




3 Check status of old saving bonds. Americans own $9 billion of bonds that are no longer paying interest; that’s $300 million a year that could be earning if the matured bonds were cashed in and new ones bought.




To find out if your bonds are still generating interest, ask for a bond-maturity booklet at your local bank or visit the Bureau of Public Debt Web site at www.publicdebt.treas.gov.




4 Start an emergency savings account. While it’s best to have at least three months of your living expenses in a savings or money-market account, a “rainy day” fund equal to at least one month’s expenses can mean the difference between inconvenience and serious hardship.




5 Get more interest income online. Certificates of deposit and savings accounts at on-line banks generally have higher yields than those accounts at brick-and-mortar banks, and they carry the same federal insurance.




For example, ING Direct, at www.ingdirect.com or (888) 464-0727, has been offering savings accounts and one-year CDs more than half a percentage point higher than the national average.




6 Set up a realistic budget. Start by tracking every penny spent; you’ll be surprised where the money goes, such as at the gas station for that pick-me-up candy bar or large coffee.




As part of the budgeting process, pay yourself first through an automatic savings method, such as having money yanked out of your bank account every month and invested directly into mutual funds. As with 401(k) contributions, this is a great way to save because the money is gone before you get a chance to spend it.




7 Meet with a financial professional. Once a year you should meet with a competent tax professional or financial planner. Review your financial activities for their tax impact, and seek additional deductions and tax breaks.




Consider municipal bonds, with the interest exempt from federal income tax and possibly state tax, too. For example, a tax-free bond that yields 5 percent is equivalent to a taxable bond yielding 7.14 percent if you are in the 30 percent bracket.




8 Pay off credit card debt. If you owe $1,000 on a card that charges 18 percent interest and make only the minimum payment each month, it will take you more than 18 years to pay it off, even if you don’t charge any more.




Consider taking out a home-equity loan or transfer the balance to a different credit card with lower rates.




9 Comparison shop car insurance. You could save money on auto insurance if you comparison shop. On the Web check out www.insweb.com, and you may save several hundred dollars.




Save even more by taking advantage of special discounts. For example, buy your auto insurance from the same place you get homeowner’s, if possible. This could mean a 10 percent savings or more. Raise the deductible on collision and comprehensive coverage to $1000 from $250, and install a car alarm to gain a comprehensive-coverage discount.




10 Long-range considerations. Some other steps may not reap immediate dividends, but will pay off over the long run.




For example, establish and maintain credit in each spouse’s name to reduce the trauma of death or divorce. Joint checking accounts are fine, but each spouse should also have money in his or her own name.




No one likes to think about death, but a will or a trust arrangement is an important financial document everyone should have. If you die without a will, the state has the authority to make decisions about your money, your children, and your property.




At the same time, coordinate the activities of your advisors, such as financial planner, attorney, accountant, and banker. If you are alone, make a list of these key associates and let a family member or close friend know where it can be found.




Also, review your life and health insurance coverage. What if you become ill or injured, and your employer’s check stops? Have you considered life insurance as a way to fund your estate-tax liability?




Martin Shenkman, author of 32 books on estate and financial planning, says everyone also needs a durable power of attorney and a living will. The first document names someone to manage affairs if the person cannot, while the second tells hospitals what to do regarding life support.




Also, be sure to jot down lock combinations and locations of hidden valuables if near death or facing potentially dangerous surgery.




But the most important tip of all is to act today to correct past mistakes.




Old-fashioned piggy banks hold billions


Want to save, but just can’t seem to get started? Perhaps a “change jar” on the dresser-top is the answer. More than 70 percent of Americans have one, according to Coinstar, the maker of coin-sorting equipment.
And how much money is being tossed into those containers? They hold $10.5 billion, estimates Coinstar.
You can start small and it will add up, according to the survey, which found that 75 percent of us will stop to pick up a penny from the street.

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