THE COLOR OF MONEY
Write down financial resolutions to heighten awareness of actions

By Michelle Singletary

Each new year, I wonder if it's worth it to make another list of resolutions that are bound to be broken before Valentine's Day.

But, you know, it is worth the effort. We all could do better. We should eat less junk food and spend more quality time with friends and family. And there are many people who desperately need to get their financial lives in order.

So stop fussing and make the promises, especially the ones to improve your personal finances.

In a survey conducted by Intuit Inc., 61 percent of the respondents listed better money management as one of their top three resolutions for 2004.

Nearly 60 percent designated "shrinking credit card debt" as their No. 1 financial resolution for the new year, three times more than the second-highest concern, "saving for retirement" (20 percent). The next highest priorities were "saving for children's college" (12 percent) and "signing up for online bill payment" (5 percent).

If you've decided to become fiscally fit in 2004, you may be wondering how to get started, Well, here's what several financial planners recommend:

• Write down your financial resolutions.

Oh, sure, you've heard this before, but have you done it?

"Writing down resolutions and then planning how you will reach them will actually stimulate a part of the brain called the reticular activating system, which will begin collecting information and routing it to the conscious part of the brain," says Dee Lee, a Harvard, Mass.-based certified financial planner and author of "Women & Money: Your Personal Finance Guide."

Once you have a plan, it becomes harder to squander your money. Lee said: "If you want to get out of debt and are about to click the buy button on eBay, you will have some nagging doubts about doing it because you have a written plan!"

• Commit to educating yourself.

"Often an individual will choose to do nothing about their personal financial planning because they just do not know or understand their options and choices," says Yvonne H. Bass, a Maryland-based financial adviser for American Express. So subscribe to a personal finance magazine. Get a basic personal finance book (and actually read it) or attend a financial seminar (and not one that is touting a get-rich quick scheme).

• Don't try to be a money-saving martyr.

There's probably fat in your budget, but resolving to eliminate entire expense categories, such as eating out, rarely works. Instead, try trimming various expenses by 10 percent or 20 percent. If you can manage to save even $60 a month by cutting out a few restaurant meals, you'll have $720 at the end of the year.

• Save something.

"With current balances in personal savings accounts and retirement plans at an all-time low, we have to make that commitment to pay ourselves first. Having cash reserves on hand for opportunities or emergencies is essential," Bass said.

If saving 10 percent seems too daunting, start with 5 percent or even 2 percent. Just make it a point to save a percentage of any income you receive.

• Be realistic.

"Wanting to be a millionaire in five years may be impossible," Lee said. "But saving the max in your 401(k) for the next five years, you may accumulate $77,800 in your nest egg. That's $13,000 a year at a 9 percent average return for five years."

• Get help if you need it.

"If this all seems like a lot, that's because it is," said James R. Cotto, managing director of investments for Cotto & Padovani Financial Strategies Group of Wachovia Securities in Mount Kisco, N.Y. "If people do not have the ability, time, nor desire to evaluate whether their current asset allocation meets their risk-tolerance needs and goals, then seek out the advice of a financial adviser."

• Finally, have faith.

"You already know how to obtain financial success," says Ric Edelman, chairman of Edelman Financial Services Inc. in Fairfax, Va.

"Spend less than you earn. Join your company retirement plan. Get the insurance coverage you need. Open bank and investment accounts and contribute to them regularly. Sign a will. Support charity," he said.

"Commit yourself to doing the things you already know you're supposed to do, do them happily and freely, and prosperity will follow."