Get fiscally fit – How to beef up your finances in ’05 | TheUnion.com
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Get fiscally fit – How to beef up your finances in ’05

Along with your waistline, January is also a good time to shape up your personal financial situation.

But unlike diets and exercise, fiscal fitness doesn’t have to include personal depravation or aches and pains. A little discipline and focus will put some muscle in your finances.

And the process can be relatively simple.



“The bottom line advice I like to give people is that you do not need to make it complicated,” said Cheryl Morhauser, a financial planner in Nevada City. “A lot of people make things way more complicated than they need to be.”

With private pensions disappearing and Social Security facing major changes, it’s more important than ever that people take control of their personal finances, three financial planners and an investment adviser said last week.




Several themes emerged in a series of interviews conducted by The Union, with most of the responses being common sense approaches to managing money that are either ignored or implemented in a half-hearted manner by most people.

Start saving on a regular basis

Americans have the lowest rate of personal savings among the industrialized nations, so saving money on a regular basis tops the list.

“Clients expect some sort of magic bullet, but I often tell them to spend less than they earn and save the difference,” said financial planner David Hope of Nevada City.

“I know that sounds kind of crazy, but that’s the foundation of what we do,” he said. “In general, I don’t think they save anything.”

“I call it pay yourself first,” said financial planner Janet Peake of Nevada City. “Everybody tends to put their bills first … savings should be one of those bills.

“Look at it as a bill that’s got to be paid instead of waiting and saying, ‘Whatever I have left over this month is what I will save,'” she said.

Peake recommends that people have a set amount automatically withdrawn from their checking account and deposited in a savings account, mutual fund, or other investment vehicle.

Get a handle on your expenses

Financial planners continue to be surprised by clients who don’t know where their money goes, particularly in these days of QuickBooks and other computer programs that make it easy to track expenses.

“It can be like pulling teeth to get people to tell me how they spend their money,” Peake said. “I could die of starvation before I ever got that.

“Overspending, not paying attention, thinking they will start saving later, these are things I see regularly,” she said.

A large component is the debt people tend to pile up on their credit cards, according to Morhauser.

“Everybody, no matter what age you are, needs to pay attention to what your debt is,” she said. “It’s not that they have too much debt but that they’ve got in the habit of using credit cards all the time.

“Sometimes it’s just a matter of making a plan to pay off outstanding balances and then staying current.”

That can also impact a person’s credit report, something Morhauser recommends that people check periodically to make sure it’s accurate.

“If you are purchasing a home or buying a car, they’re always going to check your credit report, and that determines what interest rates you end up paying.”

She suggests that people check out fico.com, where they can order a copy of their credit report and learn what they can do to improve their credit scores.

Max out your IRA and 401(k)

Hope said such retirement plans are a focus of his practice, and he urges every client to contribute as much as they can, something many clients have a difficult time doing.

“Finding a home for that money is really pretty easy,” he said. “The toughest part of the job is on the (client) side, and often times people come to us not willing to do the tough part.”

Morhauser recommends that people take a careful look at both traditional IRAs and Roth IRAs before deciding which one to invest in. While Roth IRAs are attractive because of tax and other features, they may not be appropriate for high-income younger workers, she said.

Get the basics in order

“No matter what age you are, you need to plan in case you are disabled, or something happens to you and you die young,” Morhauser said.

“Whose going to take care of your family: Is there enough insurance in place? Do you have a will? Are all of your wishes about how you’d like to see things handled written down? And are they legally binding? These are questions that need to be answers.”

Patient investing

Set goals, develop a plan, and be patient.

“Be aware of your own personal time horizon for your investment program,” said Larry Goodfriend, president of Goodfriend Financial Management in Nevada City.

“Resolve to avoid knee-jerk reactions by selling for short-term reasons when you’re a long-term investor,” he said. “There’s just so much noise in the daily media that you can be swayed to abandon your goals.”

The fear of investing in volatile markets and unreasonable expectations on returns are two issues the advisers deal with on a regular basis.

“One of the main things I see, especially in today’s markets, is fear of investing,” Peake said. “I really encourage people to look at the risk of everything, including the risk of not doing anything.

“Steady as you go, stick with your plan, and don’t let fear keep you from your plan,” she said. “Don’t get greedy when the market is up, and don’t run with fear when the market is down.”

Hope advises people to balance risk with a realistic assessment of the returns they can expect on their investments, especially if they are older.

“For some of the older clients, return of the principal is maybe more important than return on principal,” he said.

“I see people … expecting their investment advisers to get unrealistic returns for them, and in that process, they put their capital at risk when they could have lived simply and happily, and not have to worry about going back to work.”


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