New Year, New Chance to Start Over
Lee Rosenberg, CFP | December 23rd, 2008You know the drill. New Years is approaching and that means making your resolutions to improve on everything that didn’t go as planned. This year, however, we’ve all gotten a huge wake- up call and the need to regroup is far more urgent because our finances were so affected by the economic collapse. In addition, much of what 
we thought we knew about investing, saving and planning ahead has been redefined. Of course we still have to make sensible decisions, including reigning in expenses, but here are some ideas on how to approach the coming year to help you become more fiscally fit.
Remember what IS in your control… None of us will be making up for the market losses any time soon, but that doesn’t mean money management is out of our hands. The name of the game is preservation of assets and the first rule of the new year is to take a hard look at lifestyle choices. What is essential vs. what can we do without? Nobody likes holding off on major purchases, travel, cars, home improvements, etc., but if the only way to acquire them is by borrowing on credit cards and lines of credit, the risks may be too high for the rewards. Start slowly with budget cutting and involve family members who will affected by the decisions. By prioritizing together, there is a greater chance of working through this challenging time and even bringing everyone closer.
Rethink your retirement date… If you had hoped to retire within the next year or two and the decision is within your control, try to delay the date to give you time to begin restoring your portfolio and allowing more time to pass before having to draw on the money. If possible, you’ll also want to accelerate your savings in your retirement plans to maximize your deductions and be able to acquire more assets while the prices of stocks and bonds are at discounted prices.
Reduce your cost of living expenses… Though the real estate market is soft, if your large home is too big for your needs, it could be an advantageous time to sell. It will allow you to take advantage of the capital gains exclusions (for married couples it is $500,000; for singles it is $250,000) and there is no longer an age 55 and older requirement. Owning a smaller home also means big savings on overhead, taxes, maintenance, insurance and mortgage payments. Yes there will be moving expenses but the financial gains could be significant enough to warrant the decision.
Refinance… If selling your home is not a viable option, consider refinancing at the new lower rates, or accelerate the payments so that you can pay off the mortgage sooner.
Reduce your debts… We all know that credit card debt actually diminishes your purchasing power because it eats up such a big percentage of your paycheck. But what you also need to remember is the many ways it which steals your earning power through annual membership fees, exorbitant penalties for late payments and over-the-limit charges, and now, the possibility of unexpected and significant rate increases when new companies take over existing accounts. To the best of your ability, pay off the most expensive cards first and don’t run them up again. If ever there was a need for a chop shop, it’s for credit cards!
All of these tips are common sense, of course- the hard part is making them common practice. But in this uncertain economic environment, with relief and recovery a long way off, there has never been a greater need to be pro active and fiscally responsible. It’s also a good lesson for our kids to learn that it is no longer easy come, easy go.
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Tags: balanced budget, cfp, credit cards, economic collapse, economy, lee rosenberg, money management, new years resolution, personal finance, reduce debts, refinance, saving and planning
About the Author: Lee Rosenberg is the Co-founder of ARS Financial Services, Inc. As a Certified Financial Planner with more than 34 years of solid financial expertise. Lee is a registered representative of Cadaret, Grant & Co., Inc. He was also named one of the top 25 Independent Financial Advisers in the US by Rep magazine.
