Tips to Make 2007 Brighter!

by Nancy Zambell, Contributing Editor, Financially Fit

We hope you had a fabulous Christmas! After spending the last couple of weeks shopping, cooking, and entertaining, it's a relief to sit down for a few quiet moments to reflect upon the events of 2006 - and to be thankful for good health, wonderful friends and family, as well as the professional opportunities that came my way during the year. 

And naturally, my thoughts turn to money! The end of the year is the perfect time to think about plans and goals for 2007, and to develop a strategy to achieve them. 

Last month, in our Financially Fit Issue #23, we covered a few tips for helping you reduce your contributions to Uncle Sam for the 2006 tax year. If you have already taken those steps, you are moving in the right direction, with an eye to maximizing your income while minimizing your tax bite. 

Now, it's time to take your financial planning to the next level. 

The first place to start is with an accurate assessment of your financial situation: Assets, debts and net worth. Most of us have some sort of financial goal in mind: 

Short-Term Expenditures:

• That exciting vacation you've always dreamt about
• A new home or furnishings
• A state-of-art home theater system

Or, Long-Term Savings:

• Funds for educating our children, grandchildren or even, like me, my nieces and nephew. Financially Fit issue #12 details the 529 savings plans that will help you meet this goal.
• Retirement funds for everyday living, medical expenses, travel budget and an estate for your heirs
• A specific net worth dollar figure that you want to achieve

I put short-term first, intentionally, as most people make the same mistake - putting their short-term goals ahead of their long-term ones. I recommend that you reverse the order. That will do two things: 1) Ensure that you are saving and investing for the most important things in life and, 2) Drastically reduce your everyday spending on non-essential items.
 

Are you where you want to be at this point in your plan? If not, which areas are ripe for change? Here, you must take an honest look at your spending habits.  

My late mother was a consummate shopper, visiting her favorite stores several times a week, making a lot of little purchases that didn't cost much at any one time, but really added up when combined. When she fell ill, some months before passing away, she often remarked to my sister and I: "I know you girls aren't keeping my checkbook right; I have too much money at the end of the month". Well, I explained to her that was because she had not been able to do her usual shopping. She was amazed at how much money she had saved! 

It's true, that sometimes it is the little things that count. The easiest way to figure out where and how you are spending your money is to write down every expenditure you make - for at least a month. I bet you that you will be very surprised at how much money you are frittering away on non-essential items. 

Next, if you don't already have one, make a budget. First, include every possible source of income - your job, your retirement pensions, Social Security, inheritances and investment income. Now, list all the upcoming expenditures you can think of that you will need to make (notice, I said 'need'!) - in the short-term and long-term.  

Then, perform a realistic calculation of how much money you will need in retirement. Financially Fit issue #17 will help you with finding the right information for that assessment. Next, consider the amount and frequency of the contributions you can make to help you fulfill that goal. 

After that, think about the size of the estate you would like to leave your heirs. In talking to friends, customers, and business associates, I often find that most men have a specific dollar figure in mind, while most women do not. I assure you that if you don't plan for a specific amount of savings, that you will most likely not ever reach that goal. 

Then, be realistic. Is that amount achievable, based on your current income and spending retinue? If not, what can you do to change your income and expenditures to fulfill that goal? Next, you will need to ponder how to minimize taxes so that your heirs can receive the maximum possible amount of the monies you have worked so hard to accumulate. There are many excellent books on this subject and a good financial planner can help tremendously. And in the not-too-distant future, I will be covering estate and tax planning in Financially Fit, so stay tuned to these pages. 

Now, you have the hard work finished; you have an estimate of how much money you will have to work with and you have a pretty good idea of how it's going to be spent. The first part of your mission is to maximize that income by managing your investment portfolio very carefully and continuously monitoring it to ensure that it is performing according to your needs. Financially Fit, issue #3 will help you determine the right mix of investments based on your personal risk profile. 

And the rest of your plan should be devoted to minimizing your expenses, including your taxes.  

All that's left is to execute the plan. And that requires discipline, paying the necessary expenses first, then immediately setting aside your funds for investing and savings. Frivolous expenses should be at the bottom of the totem pole. It's fine to reward yourself occasionally, but a far greater reward will be the warm and fuzzy feeling you will get when you have your finances in control and can see your funds steadily building toward the goals you have set. 

We wish you success in your planning and a profitable, healthy 2007! 

Until next week…
 

This concludes this week's issue of Financially Fit.  We encourage you to visit our website to review past issues of Financially Fit:

http://www.brokeradviser.com/newsletter.cfm


Disclaimer & Important Information

Financially Fit is owned and published by Business Financial Publishing, LLC of Washington D.C.  Business Financial Publishing is neither a registered investment adviser nor a broker/dealer.  Readers are advised that this electronic publication is issued solely for information purposes and should not to be construed as an offer to sell or the solicitation of an offer to buy any security.

The views expressed herein are based upon our analysis of the issuer's public disclosures, and assumes both their accuracy and completeness.

The opinions and statements included herein are based on sources (including the companies discussed and public sources) believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. We have not independently verified the information contained herein. This information is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. We encourage you to consult with independent financial advisors with respect to any investment in the securities mentioned herein. You should review a complete information package on all companies, which should include, but not be limited to, the Company's annual report, quarterly reports, press releases and all regulatory filings. All information contained in Financially Fit should be independently verified with the subject company. The foregoing discussion contains  statements which are based on current expectations, estimates and projections, and differences from such expectations, estimates and projections can be expected.

Financially Fit is intended only for residents of the United States. Financially Fit is not for residents of the United Kingdom and is not an approved publication by the Financial Services Authority in the UK.

The information contained in this newsletter is not intended to be a complete discussion of information regarding all of the current and/or intended business activities of the covered companies. Any opinions expressed in Financially Fit are statements of judgment as of the date of publication, are subject to change without further notice, and may not necessarily be reprinted in future publications or elsewhere.

Business Financial Publishing and its members, managers, writers and employees do not accept compensation from the companies discussed within Financially Fit, nor any of our individual newsletter publications (Growth Report, Rising Star Stocks, Supernova Stocks).

Business Financial Publishing and its members, managers, writers and employees, and their families from time to time positions in the securities of the companies discussed within Financially Fit.  These positions are subject to change at any time without notice.