Ten Things to Stop Doing in 2006
By
Don Taylor
Bankrate.comThis
column is a bit of a twist when compared to top
10 columns from previous years. I'd like you to think
about some
things you need to stop doing in 2006 versus things
you need to
do. While you're at it, take some time during this
holiday season
to reflect on how you're doing financially and how
your finances
are going to help you get what you want out of life.
Have a joyful
and prosperous New Year. 1.
Stop spending more than you
make
It's
really the key step in moving forward to achieve your
financial
and life goals. You have a limited amount of income
that you can allocate between
current consumption, investing for future goals and
perhaps paying for past consumption.
If you keep spending more than you make you're limiting your choices in the future.2.
Stop
living paycheck to paycheck
There
are plenty of divergent opinions as to how much you
should
have set aside in cash reserves as an emergency fund,
but this tip
really is more fundamental than that point. An emergency
fund is
a buffer to tide you over during a period of financial
troubles.
Not living paycheck to paycheck means that you have
a liquidity
cushion when it comes to meeting your day-to-day expenses.
Get away
from the point where you're one paycheck away from
financial disaster
by adding some liquidity to your financial picture. 3.
Stop
running up credit card balances
Deficits
matter -- especially personal spending deficits. Interest
rates have headed higher over the past two years with
the Federal
Reserve raising the targeted federal funds rate by
a quarter percent
13 times in the last 13 Federal Reserve Open Market
Committee meetings.
The WSJ Prime Rate is now at 7.25 percent, up from
5.25 percent
a year ago. Variable-rate credit cards are typically
tied to the
prime rate. Fixed rate credit card rates tend to lag
these changes,
but a fixed rate isn't a lifetime commitment, and you
can expect
these rates to trend higher too. 4.
Stop
using variable rate debt
OK,
I don't really want you to stop using variable rate
debt; I
just want you to reconsider how you're using variable
rate debt.
The interest rates on the home equity lines of credit,
or HELOC,
adjustable-rate mortgages and variable rate credit
cards keep moving
higher. While Fed watchers hypothecate that we're getting
pretty
close to the end of a Fed tightening cycle, that doesn't
mean that
we're looking at the Fed starting a cycle of easier
money any time
soon. Fixed-rate mortgages tend to move with changes
in the 10-year
U.S. Treasury note. That yield has been fairly range
bound between
4 percent and 5 percent since the Fed started tightening.
Sure,
30-year fixed rate mortgages are over 6 percent, but
they've been
fairly range bound too, staying between 5.5 percent
and 6.375 percent
over that same time period.
If
you plan on being in your house for a while and
are currently in an adjustable-rate mortgage, interest-only
mortgage
or have a HELOC outstanding, think through the costs
of refinancing
versus continuing to take on the interest rate risk
with variable
rate debt. 5. Stop counting on Social Security
This
one's not for current retirees or for people near retirement.
It's for people who are early on in their working careers
or mid-career.
It's not meant to be alarmist, but employers and the
federal government
are providing incentives for you to save for retirement
for a reason.
If your employer matches all or part of your contributions
to a
retirement plan, you should strive to contribute up
to the limit
of that match. Check out the new Roth 401(k) available
in 2006.
Start building a retirement war chest -- you're going to need it.6.
Stop
leaving checks in your mailbox
Every
time I see the little red flag up on a mailbox I think
of
it as an invitation for someone other than the mail
carrier to pick
up the mail. The U.S. Postal Service doesn't have a
mailbox on every
street corner any more, so it may be a bit of an inconvenience
to
take the extra step in mailing your letters. But between
identity
theft issues and check washing schemes, you really
don't want to
take the risk. With
first class postage
going to 39 cents effective Jan. 8, you may decide
that 2006 is your year to join
the next century and pay bills over the Internet using
your financial institution's
bill-paying service. Regardless
of how you decide to change your habits
you should stop leaving checks in your mailbox. 7.
Stop identity theft
The
good doctor had a bad year last year when it came
to identity theft. I got the letter from ChoicePoint
telling me that my file was
one of many stolen in that debacle. To their credit,
I at least got a letter notifying
me of the problem and a free year of credit monitoring.
Meanwhile, I still don't
know if my file was appropriated in the identity theft
scandals involving DSW
or Bank of America. The
Fair and Accurate Credit Transactions Act gives
you the right to a free copy of your credit report
once each year
from the three major credit bureaus -- Equifax, Experian
and TransUnion.
Rotate through the firms during the year by requesting
a credit
report every four months. The Bankrate feature, "How
to get your free credit report," provides the contact information.Other
consumer reporting agencies like ChexSystems
(banking) or MIB (life insurance) that fall under the
Fair Credit
Act also have to provide you with a free copy of their
report once
each year. The Bankrate feature, "Specialty
consumer reports reveal your secrets,"
tells you how to
request these specialty consumer reports. Shred
your unneeded financial documents. Buy a shredder,
preferably
a cross-cut shredder, or, if your community offers
this service,
attend the next community shred. Although
I have found the credit
monitoring service valuable this year because of the
ChoicePoint incident, I don't
see myself continuing that service when it's my nickel paying for it. 8.
Stop phishing
This
hasn't been much of a problem in my e-mail this year
-- the
spam filter must be doing its job -- but you need to
be vigilant
about how you share your personal information on the
Internet. Phishing
is an Internet scam that uses spam or pop-up messages
to trick you
into disclosing your bank account, credit cards, Social
Security
number, personal identification numbers, or PINs, or
other financially
sensitive information. It's a fairly insidious attempt
at identity
theft. When in doubt about a request for information,
go to the
Web site on your own and look for commentary or discussion
about
a phishing scam. Never click through on the links in
the message.
The FTC has a guide
that provides some tips about protecting yourself against
phishing
trips. 9. Stop the status quo
This
top 10 tip relates to Newton's first law of motion.
That is, an object in motion tends to stay in motion,
and an object at rest tends
to stay at rest unless another force acts on it. If
not being able to decide
what mutual fund to invest in is keeping you from contributing
to a retirement
account, then find a way to get past that obstacle.
If you already have an investment
portfolio, review your holdings and decide if you need
to rebalance or reallocate
the portfolio to bring it in line with your attitude
towards risk and your investment
goals. Find
your way around the obstacles that are keeping you
from your
goals. If you're spending more than you make, put together
a spending plan. If
you are living paycheck to paycheck, try to build some
liquidity. When you can't
figure out how to get around a roadblock, ask for help.
Whether it's a financial
planner, fitness trainer, motivational coach or trusted
friend, a fresh set of
eyes and ears can help you see your way past the obstacle
and put you on track
to meet your goals. 10. Stop missing out on smelling the roses
Easier
said than done, I know, but there's more to life than
working to pay the bills. Find a way to put joy in
your life if it's missing or
add to your joy if it's not. People make New Year's
resolutions because they're
hopeful as to what the New Year will bring. Go beyond
fitness and finances to
figure out what you want out of life and work towards it.
Contact
Dr. Don with your questions Back
to Your Money: Financial New Year's Resolutions | 
