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As you transition into 2007, it's a good time to take
stock and make plans.
This is my seventh year writing a New Year's column
that suggests steps readers can take to improve their finances in
the coming year. Here's hoping you have a safe and prosperous new
year and that it's a lucky seven for you, too.
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| Dr. Don's top 7 for '07 |
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1. Spend less
than you make. Easy to say, not so easy to do, but making
a commitment to living within your means is a first step toward
working toward the future instead of just thinking about today.
If you have a big credit hangover, you'll have to take your medicine
and get out from under your past spending, too. Debt restructuring
can free up some money in the monthly spending plan but doesn't
pay off debt, it just changes the terms. Don't make that decision
lightly. Put together a spending plan for the coming year. Don't
call it a budget. Nobody likes to budget. Accentuate the positive.
How are you going to spend your income this year? The "Budgeting
101: Start your own budget" calculator works, even though
it's not called a spending plan.
2. Start
investing for your future. Once you get the hang of spending
less than you make, it's time to look at where you are going to
invest the surplus. Building liquidity in an emergency fund is a
good second step. Contributing at least up to the limit of
your company's matching program in your 401(k) or
403(b)
plan is another good second step. The first step is to figure
out your investment goals. Whether it's the children's education,
a comfortable retirement or a cruise around the world, naming the
goal is an important part of reaching the goal. On my nightstand
this holiday season is "Lighting the Torch: The Kinder Method of
Life Planning." Money can facilitate achieving life goals but isn't
much of a goal in isolation. When you know what you're working toward
you'll be more committed to investing for those goals.
3. Freeze
your credit report. Not everyone can do this, yet. In some
states you can only freeze your credit report if you have been a
victim of identity theft. In more enlightened states you can freeze
your report regardless of whether you've been an identity theft
victim. In states yet to be enlightened you can write your state
legislators and ask them to get on the bandwagon. The Bankrate feature,
"14
myths about credit freezes" sorts through the issues.
I'd like to see everyone who can,
and who thinks it's a good idea, freeze their credit reports to send a strong
message to the consumer reporting agencies and the government that the current
system isn't working and that the credit reporting industry needs to do a better
job in safeguarding consumers from identity theft.
On the topic
of credit reports, I mark my calendar to get a free credit report every four months
from one of the three major credit bureaus: TransUnion, Equifax and Experian. You're
entitled to one free report a year from a credit bureau. Rotating the requests
through the year helps you stay on top of your credit for free. This Bankrate
feature provides the contact
information to get these free reports.
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