1Let’s talk about debt
So it’s that time of the season again, and every year I run down some year end money tips that everyone should have in place. Let’s get started with the big one: Debt. How much are you holding onto right now? Debt is like a gigantic concrete block hanging around your neck, as you jump into the water. It’s so very difficult to get ahead and accumulate savings and wealth when you have to keep stroking checks and making payments. Listen, you’ve known me long enough to know I’m not a radical: obviously you need to have debt to afford to purchase certain things. But it’s the revolving debt that’s a killer.
On the heels of the last money tip, your credit cards need to be in order. How many do you have now? And which ones have balances on them? Make a list and start rating those that have the highest interest rates associated with them that you’re going to earmark them to be paid off FIRST. Attack debt based on the HIGHEST interest rate debt, and chisel that balance down, down, down. Then do the same with the second highest debt, and then third and so on. Wealth comes from paying yourself first, not the credit card company. So this Christmas season, use your debit card, pay cash, or write a check. Avoid the credit cards if you have a hard time managing them.
Interest rates your paying, including car loans, student loans, and yes, mortgages are very important to review this time of year. Why? We’ll we’ve got record low rates. I mean the banks barely pay you a half-percent interest. Mortgage rate for 30 year loans are under 5 percent. And it’s going to stay this way for a while. I told you that last year at this time, if you recall. Every household needs to have written DOWN a list of all the interest rates your loans have associated with them. Keep a watchful eye on them. And start asking yourself how can I refinance what I owe to a much lower rate. That in itself, will help you free up cash that you can put towards savings or a retirement account.
This time of the year, I get tons of questions about portfolio and investment reviews to see how people have fared this year. That’s smart. And if you haven’t looked at your investments or savings in a while, now’s the time to do an evaluation. You can do that yourself by comparing where your investments were a year ago, compared to now. And most importantly to make sure WHAT you own and are invested in fits your vision and goals of where you want your money to be 5, 10 or 20 years from now. Markets change. Investments change. Your account changes. And YOU change. So make sure you’re doing your reviews, whether on your own, with a financial advisor you trust or other counselor, such as an accountant. Make a commitment to do this.
Proper payroll withholding and taking advantage of employee benefits, such as 401ks and matching is a big issue. And it’s SMART money advice this time of the year. After all the year has only a couple weeks left in it. You can pretty much project where you’re going to end up with your income. Start honing in on how much you’re contributing to your company 401k plan, and also now how much your employer kicks in on your behalf. And if you have any year end benefits plans where you’ve accumulated cash, you need to use them by year end or lose it. And hey: don’t forget the MOST important benefit: Yourself and any vacation time you’ve accrued. Use it for health and peace of mind, or lose it.