1. Write an investment policy statement. Do this even,
perhaps especially, if you have someone else managing your
money, suggests Gary Hager, a money manager in Edison, New
Jersey. And be as specific as possible.
Include the following: What goals you are investing for,
and how far in the future they are; how much risk you're
willing to take; your tax situation; the social values you'd
like your investments to embody; and the philosophy that
underpins your investment behavior.
For example: Do you intend to review investments monthly
and shift in and out of companies based on the news and
earnings reports? Or do you want a stable portfolio of mutual
funds that you will rebalance only annually? Having a detailed,
written investment policy will protect you the next time a pal
recommends "a sure thing" or you encounter a bad broker.
2. Write a charity plan. Chances are you've written a few
checks to charity in recent weeks. First there was the
tax-motivated year-end giving; then the neighbor who was
collecting for... whatever; then the tsunami hit and you opened
your heart and that checkbook once more. It's all good, but it
could be better if you structured your largesse.
Sit down at the beginning of the year, look at how much you
gave last year and apportion it, and more, over the year to
come. If you plan in advance, you can give larger amounts to
fewer charities; thus increasing the impact of your money and
decreasing your mailbox load.
Perhaps set some policy goals -- say 50 percent for
religiously connected charities; 30 percent for health; 10
percent for the arts, and 10 percent held back for emergency or
spur-of-the-moment donations. You could also decide not to give
to any group that hounds you for money, or that doesn't have
financial practices which pass muster at http://give.org, the
Web site of the Better Business Bureau's charity watchdog
agency.
3. Write a credit restructuring plan. Decide how you will
use the credit resources available to you, including credit
cards and a home equity line of credit. Determine which
expenses you will charge and which ones you won't, and what
kinds of card rewards you care about and what kind you don't.
Create a realistic pay-down plan. Once you've written it
all down, you can take some actions to really shrink your debt.
Collect all the mail you're about to receive from credit card
issuers. Find the one that offers the best deal on balance
transfers, and use that account to wipe out your holiday spree.
Authorize a regular draft from your checking account to make
sure that pay-down plan is put into effect. Choose another card
with the right rewards and use that one for day-to-day expenses
that you'll pay off monthly.
4. Write a spending plan. This is not the same thing as
boring budgeting, nor does it require you to determine ahead of
time where each dollar goes or how many lattes you're allowed
to drink in a month. But it should force you to confront your
priorities.
Look at how much you spent last year on life's necessities
-- food and fuel and savings and mortgage payments. Determine
where you want the rest of it to go; plan to spend on that new
car or family vacation if it's important to you this year;
allow a slush fund for the occasional fun splurge.
Too many priorities for the cash available? Squeeze those
regular expenses for a little bit of extra savings, and make a
multiyear plan for the items, trips, vehicles you really want
but can't afford this year.
5. Finally, create your own tax plan. That can be as simple
as setting up an accordion folder to make sure you capture
every receipt. Look over your old tax returns so you can see
the kinds of items you typically deduct, and read up a bit so
you know what else you qualify for. Then plan to conduct your
finances all year so that you can limit your taxes.
If you donate items, get a receipt. If you see yourself
piling on miscellaneous deductions, add those extras in the
same calendar year. If you sell a security for a big gain, see
if you can find another one to sell for a loss.
A year from now, you'll be richer, more secure and less
worried about money. It's all part of the plan.
