New Year's resolutions can improve your financial life

by Gary L. Wortman

for the Business Journal

Financial peace of mind, like good health, requires some effort. If you want to achieve financial security, consider adopting the following New Year's resolutions:

Live beneath your means. If 1998 was a banner year for you financially, consider how you spend your extra bucks on luxuries. If you want a secure financial future, you need to spend less than what you earn.

Save more regularly. Set a savings goal for the year and decide what you need to put away each month to reach that goal. Be prepared to make some sacrifices to meet your monthly savings objectives. If you lack discipline, have money automatically deducted from your paycheck and deposited into a savings vehicle of your choice.

Make sure savings are invested wisely. Your savings should be spread among different kinds of investments, from traditional money market accounts, to mutual funds, to stocks and bonds, with varying degrees of risk.

The best strateg sy for you will depend on your current stage in life and short- and long-term financial goals as well as the performance of various investment vehicles.

Reduce debt. Pay off those credit cards and reduce other installment debt as much as possible.

If necessary, consolidate your debt with a home equity loan. In most instances, you'll be able to deduct the interest you pay.

Reduce your income taxes. Make tax planning a year-round effort and you're likely to find yourself eligible for more tax deductions.

Take actions that will enable you to benefit from tax breaks such as investing in the new Roth IRA, participating in a Roth rollover, taking advantage of education tax credits and shifting assets to your children.

Assess your insurance coverage. Check medical and hospitalization as well as disability and life insurance. Make sure you have sufficient coverage in all areas to provide for your family.

Teach your children money management basics. When it comes to effective money management, don't go it alone. Teach your children how to spend and save money responsibly and to establish their own financial goals.

Set up an emergency fund. If you don't already have one, set aside three to six months' worth of living expenses in a liquid fund.

You will want that much cash available in the event of a job loss or serious illness.

Improve your recordkeeping. The better your financial records, the better you can manage your money. You'll know more about how you are spending your money so you can make changes in your spending habits if necessary. Effective recordkeeping also can help you identify tax-deductible expenses.

Be happy with what you've got. Remember, most of us can't afford to buy everything we want.

Make sure your financial goals are attainable given your financial situation, and make the most of the financial resources that you have.

(Gary Wortman, CPA, PFS, CFP, is a partner in the Springfield office of Baird, Kurtz & Dobson, certified public accountants.)

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