A Suze Orman exclusive

Alrighty, enough about mortgages. Let's see where we can save you some more money.

• Review Your Life Insurance Needs. The prime reason to buy life insurance is to provide income for anyone who is dependent on you. Such as your kids or a spouse. If your kids are now grown, or you are divorced, you might think twice about continuing to make your payments. Or at least reevaluate how much coverage you need. When you were younger you had fewer assets, so you needed more insurance. But if you now have more assets, you can decrease the amount of coverage you have. If you happen to have a cash-value policy such as Whole Life, Universal Life, or Variable Life, you can save a chunk of change by dropping that policy and buying a Term Life policy. Now of course do not drop an existing policy before you have a new policy in hand. But assuming you can qualify for a good Term policy, you could see your annual premium costs cut in half, if not more. Even if you have an existing Term policy, I recommend shopping for a new one. Premiums have dropped more than 50 percent in the past 10 years, so doing a refinancing can save you a few hundred dollars a year. But I repeat: do not get rid of your existing policy until you have the new policy up and running! You never want to take those kinds of chances with insurance! Websites such as www.term4sale.com, www.selectquote.com, and www.accuquote.com are good online insurance sites.
  
  
• Drive Your Car Longer. Hold on to your car after you've got it paid off. There seems to be a three or four year itch where once you get your car loan paid off, you want to buy a new car. Don't scratch that itch! I want you to keep driving your car for at least another three or four years after you've paid it off-but (and here's the real trick) continue to make the monthly loan payments to yourself. For example, if you have a $350 monthly car payment, once it is paid off drive the car for at least another three years, while depositing the $350 a month into your own savings account. After three years you will have nearly $14,000 saved, assuming a 7 percent annual return. Keep it invested - even without adding another penny - for 20 years, and you will have more than $50,000. (And I am praying you don't lease; see my Leasing article for more details on why leasing is such a money drain.)
  
  
• Pay Down Your Credit Card Balance or Transfer to a Low-Rate Card. If you are running a credit card balance and paying a high interest rate - the average these days is a ridiculous 15 percent - cutting your rate, or getting your balance down, will save you a ton of money. That's money you can use to pay off your mortgage faster or invest for your retirement. See my article, "Top Credit Card Pitfalls" for more information.
  
  
• Raise Your Home and Car Insurance Deductibles. You can reduce your annual premiums by 20 percent or so if you boost the deductibles. And in today's insurance world that's simply smart business. If you happen to have a low deductible and make a lot of claims, chances are pretty good your insurer will either boost your premium cost at your next renewal, to "get back" the money they paid out to you, or, even worse, they can choose to cancel your coverage. The bottom line is that you only want to make insurance claims for big-ticket problems. So boost those $250 and $500 deductibles to at least $1,000. It will keep your insurer happy, and if your current combined premiums for your home and car are about $1,500, you are looking at saving $300 or so a year by doing so. Invest that $300 a year at 7 percent and in 20 years you will have more than $13,000 saved up. If you have an old car, you should also look into whether you still need collision coverage. There's no need to pay for it if your car's market value - what your insurer would pay you should your car gets totaled - doesn't amount to much minus the deductible.
  
  
• Stop Getting a Tax Refund. A tax refund means you have screwed up. Plain and simple. Because you didn't have the right amount withheld from your pay (or because you overpaid on your estimated tax payments if you are self-employed) Uncle Sam returns the overpayment to you in the form of a refund. There are two big problems with this. First of all, during the year Uncle Sam got to earn interest on that money, not you. Second, when people get refund checks they always seem to blow them on vacations or shopping mall pig-outs. It's pretty rare to hear of someone who took a refund and invested it. And considering the average refund amount is about $2,500, that is a colossal waste of money. Let's say you got your withholding straightened out so you had that $2,500 coming to you during the year in bigger paychecks, rather than as a lump-sum refund from Uncle Sam. That works out to about an extra $208 a month. How about you set up an automatic withdrawal from your bank account into a mutual fund account for a Roth IRA? (If you are single and your adjusted gross income is below $95,000, you can contribute up to $3,000 a year in a Roth. Married couples filing a joint return can make the maximum contribution if their AGI is below $150,000. Anyone over the age of 50 can invest $3,500 a year. Those limits rise to $4,000 under 50/$4500 over 50 in 2005, and $4,000/$5,000 in 2006 and 2007.)

  Let's say you choose a low-cost index fund that returns 7 percent a year on average. In 20 years your $208 a month investment will be worth more than $108,000. And assuming you are at least 59 ½ when you start making withdrawals, and your money has been invested for at least five years, you get to take out all the money with absolutely no taxes. That's why they are my favorite investment choice.

  And while we're on the subject of taxes, why not start doing them yourself? There are plenty of great software products where usually you can have your federal and state taxes done in just an hour or two. The $30-$50 or so for the software is going to be a lot less than what your CPA currently charges. And I've got news for you: most tax preparers are using the same software anyway.
  
  

• Keep Money in Your 401(k) If You're Laid Off After You Turn 55. The IRS will typically hit you with a 10 percent penalty if you try and withdraw money from your 401(k) before you are 59 ½. But if you happen to get laid off or quit during the year you will turn 55 or older, you can start making withdrawals from your 401(k) in any amount you want and not get slapped with that 10 percent penalty. This is only true for 401(k) plans, not IRA rollovers. You will of course still owe ordinary income taxes on this money, but hey, 10% is 10%. So if you do find yourself out of work for whatever reason, and you are going to be 55 or older in the year you left that job, don't automatically transfer all your money out of the 401(k) into an IRA rollover. If you have more than $5000 in the account (under that amount you are required to take it out), leave some or all of your money in the company 401(k); you'll have a nice fallback if you need cash before you are 59 ½.

So there you have it: there are plenty of ways to get your finances in shape for retirement. It just means putting a stop to the procrastination and putting a plan into action. Get moving. You're not getting any younger.