Improve Your Financial Health
Here are a few simple ideas you can implement that will get your finances into tip top shape. The wealthy do these simple things. Remember if you want to be poor do what the poor do. If you want to be wealthy do what the wealthy do.
Check your credit report.
Since September, all Americans have been entitled to check their credit report once a year for free.
A credit report is a history of your borrowing and loan paying habits. If you have good habits, you have a high so-called FICO score. If not, you have a low score. Anything 750 or over is excellent.
The higher the score, the lower the interest rate you’ll pay on future loans. The credit report also will tip you off if someone else is using your good name to borrow money fraudulently, i.e. identity theft. That’s why it’s important to know what’s on your record.
To get your free report, go to the website set up by the Federal Trade Commission: www.annualcreditreport.com. Or call toll-free: 877-322-8228. Or write: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Update your insurance
If Hurricane Rita, Katrina and Wilma have taught us anything, it’s to make sure you have enough and the right insurance.
Homeowner’s insurance usually covers wind, fire and rain damage to your property and its contents.
It doesn’t cover flood damage. For that, you need a federal flood insurance policy (see www.floodsmart.gov). If you live in a high-risk flood zone, such as on the coast, expect to pay more than if you are insuring a house in the mountains.
Homeowner’s insurance will usually pay for the temporary housing and food if you can’t live in your home because of damage that’s covered by the policy. But what living expenses are covered, and for how long, depends on the policy. Flood insurance doesn’t cover these living expenses.
Be sure you accurately estimate the value of your household goods. It may be more expensive to replace them than you think. Many items also increase in value each year. You may need to ensure big-ticket things such as jewelry separately if the homeowner’s policy limits the payout for these items.
Make a money disaster kit.
While we’re on disasters, everyone needs to be able to get their hands on important financial documents fast. Put copies of all your important papers-your will, passport, mortgage statement, property insurance, car title-in a waterproof bag and have it in a tote you can grab if you have to leave the house quickly for a fire, flood, tornado or any terrorist attack.
Throw in copies of your favorite family photos, too. That’s what people miss most when a house is destroyed, not the dining room table. And photos can help you find and identify family members if you are separated by an emergency. The Red Cross has tips on what to take. (See www.redcross.org.)
Set up a living will and pick a medical advocate
Remember Terry Schiavo? She was the brain-damaged Florida woman who died after a very public family battle about whether to withdraw her feeding tube. Her husband said she never would have wanted to live in a vegetative state. Her parents said there was hope and she should live. The State Legislature passed a law that allowed Jeb Bush to intervene and order the tube to be reinserted. The state Supreme Court ruled the law unconstitutional. She died in March after the tube was removed.
If you don’t want that kind of battle, you need to make your wishes known in writing, legally. Name a medical advocate, someone with the authority to decide for you if you can’t decide for yourself.
Think hard about who that person is. You probably don’t want someone who’ll pull the plug right away. On the other hand, you might want someone with the guts to make the tough decision when all hope is gone.
Five Wishes is an example of a living will. It is offered by Aging with Dignity a non-profit group in Tallahassee, Fla., which is an advocate for medical directives. The Five Wishes document lets you name a health advocate and determine what kinds of medical treatment you want, among other things. (See www.agingwithdignity.org.)
A living will won’t guarantee that you don’t end on feeding tubes. The paperwork might not be available when health care professionals make emergency decisions, for instance. But if you have named an advocate, they can make decisions that you have already discussed.
Add 1% to retirement savings
Big goals are so, well, big. So keep it small and simple. Just increase your savings for retirement by 1% each. So if you contribute 4% this year increase that to 5% next year. You won’t even miss it. And it’ll add up. When you realize how painless that is, do it again. You know you’re supposed to contribute the maximum you can to your retirement account. Start small and work your way up. You’ll feel better.
Pay off your highest-rate credit card.
If it’s to big to say, “I’m going to pay off my credit card debt,” then start small. Pick the highest-rate card. Call the credit card company first try to negotiate a lower rate.
If you’ve paid on time you should be able to get the rate lower. You probably won’t be able to talk you rate down really low, but take what you can get. Then, focus on paying it off. Double up on your monthly payments or more, if you can. Pay the monthly minimum on lower-rate cards.
The average U.S credit card debt per household is estimated at $9,312, according to CardWeb.com. Gulp.
Start a Christmas fund
In the olden days, people use to set up separate savings accounts for holidays. Quaint, huh?
But, as you sit there reading USA TODAY, and drinking your latte, while still paying for last year’s Christmas gift, think how smug you would feel if you’d paid cash for everything. Or, almost everything. By the way if you carry the old Christmas balance from month to month you actually pay 29% more for that item. But Paul, I did not have the cash to buy it and it was on sale at 15%. Does anyone, but me, see the “Negative Wealth Creating” philosophy of this statement?
Be sure you get a low or no fee account. Some banks offer interest earning “Christmas Club” savings accounts that you can open with just $1 dollar. You can set up automatic transfers of $50 a month. Or $100. You’ll have $500 to $1,000 in cash next November when you have hit the pre-Christmas sales.
It’s an old-fashioned personal-finance tip. But what worked for grandma can work for you.
Back it up
Scan all your important documents and pictures onto your computer. Download those great digital “pics” onto your computer. Once there they are still subject to disaster (fire, flood, hurricane, tornado). So use an online back up system. There are many service centers out there to help. I use carbonite (no, superman lovers I did not say Kryptonite). See www.carbonite.com. The fee is about $50 per year.