Edi Alvarez, MSc, CFP®
Life Happens, so enjoy it! Regularly you should track your finances BUT do enjoy and appreciate the wonders of life in the moment. Do remain centered on your family and personal goals and don’t keep up with the Jones’s or act on water-cooler investment advice.
Always work on understanding & visualizing your goals.Try to live within your existing budget even as your income improves. Consider using software like mint.com or Quicken to track your spending. Always save for a rainy day because when those days arrive you need to be well prepared to ensure you don’t drown.
Negotiate everything from cable bills to credit card fees to rent. You never know until you ask. Many service providers will work with you. Always be polite and ask for a reduced rate but don’t divulge your finances.
Employee benefits. Many firms have begun offering Roth 401Ks and Health Savings Accounts (HSAs), and firm equity. Review these benefits within your entire financial plan. Are these benefits part of your wealth building plan?
Tax rates. Capital gains and dividend tax rates are low in 2010, but are expected to rise in 2011. This may be a time to sell investments you are planning to sell in the next few years. Consider a Roth, it will likely benefit you to put some of your IRA money into it as long as you can handle the tax consequences all in 2010. Since we don’t know the tax rates in 2011 consider carefully any suggestions to defer Roth tax payments to 2011 and 2012.
Cash. Always evaluate your cash needs and only leave enough in cash that is not earmarked for shortterm uses or emergency savings. You might want to keep your cash in the best earning conservative vehicle and the remainder should be in bond or may even be better used to pay down mortgage – you’ll need to check your overall plan and do the numbers to make sure which is the best choice for you.
Rebalance regularly. The market continues to show us that we can’t predict when it will have sudden changes so don’t attempt to time the market, but do time your rebalancing to your portfolio allocation. This should give you opportunities to remove excess earnings from a winning security and buy those that are inexpensive.
Each year manage your credit report. If you have not already, implement a regular schedule of requesting your free annual credit report from www.annualcreditreport.com. When making this request make sure that you are NOT paying a fee. Carefully navigate the website and get one free report each year from each of the three main credit reporting agencies, make sure to request a different agency every four months. Always check the report for errors.
Keep an eye on fees and expenses. Pay attention to commissions, fund management and other expenses incurred on your investments, banking and other services/products. Make sure that the fees are appropriate with the service/results experienced. Watch for hidden fees that are not providing you with value.