2004 financial goals begin now
By Russ Wiles
Arizona Republic
If you haven't had much success achieving personal-finance goals before, maybe the calendar is to blame.
Many people start each new year with the best intentions of saving more, charging less, investing wisely, drafting a will, cutting taxes and so on. What they often fail to consider is the preparation work that's usually required first.
Individuals who don't think seriously about their money resolutions until after the glitter ball drops in Times Square often find that they're running late.
Plenty of people are thinking about some of the money moves they could make in 2004.
Laurel Miller, a grade-school teacher in Scottsdale, Ariz., resolves to build up an emergency cash reserve equal to at least three months of her pay. Susan Ratliff, who runs a trade-show-display company in Phoenix, vows to draft a will. Yan Ross, an attorney who lives in Phoenix, pledges to do his best not to become an identity-theft victim. "I've resolved that nobody else is going to be me," he said.
The number of worthy financial goals is almost limitless. Some fall under the heading of annual checkups. These include the need to rebalance your investment portfolio at least once a year and to make sure you have listed the correct beneficiaries in your will, insurance policy and retirement accounts.
Other resolutions fall under the headings of personal growth or development, such as joining an investment club or learning something fresh about unfamiliar assets such as rental real estate.
Given major changes this year to the tax code, you may want to rethink some of your spending and investment strategies. For example, you might resolve to make greater use of stock dividends, which received a tax break, compared with bond interest payments, which didn't.
Retirement plans offer generous tax-saving opportunities, and it even pays to put more money into workplace "flexible spending accounts" to pay for unreimbursed healthcare costs.
"Taxes are the largest lifetime expense for many people," said Don Larson of Steele Larson & Associates in Gilbert, Ariz. "Proactive tax planning is essential."
Some of the toughest resolutions to achieve involve making basic behavioral changes, especially when it comes to spending and credit use.
"Most of the financial sins I see derive from negative cash flow," said Alan Havir, a financial consultant with Financial Network Investment Corp. in Glendale, Ariz. "I see people making $400,000 a year who still spend $20,000 more than that."
Financial advisers and psychologists point to certain steps you can take to boost the odds of achieving your goals.
One is simply writing down your resolutions and posting them in a prominent place, such as on the refrigerator. While you're at it, break down each goal into manageable steps and set deadlines.
It helps to incorporate desired behavior, such as better budgeting, into a permanent routine instead of viewing it as a one-step action item to be scratched off a list. It may take at least three or four weeks to change a bad habit.
Another tip for success involves designating someone to whom you can report your progress, such as a spouse, friend or professional adviser.
Just as some people seeking to lose weight hire personal trainers, many individuals hire advisers to get their finances in shape, Larson said.
It's helpful to get feedback on your progress, and having someone else monitor your situation can provide much-needed accountability.
"A lot of people find they need to work with an accountant or financial planner," Havir said. "They know they'll have to meet with that person next year and can't keep their finances in such shambles."
