, Newburyport, MA


April 5, 2011

Taxes done; what next?

Remember all of the resolutions you made in January? Save more. Use the credit card less. Stick to a budget. Review insurance coverage. Have the will updated. Reallocate the 401(k).

How are you doing on those resolutions? Even though three-quarters of the year remains, now is an excellent time to take the action you need to take to put your financial house in order.

Your taxes have been filed or will be soon. Just preparing to file, you had to gather a lot of your financial information. It's at your fingertips. Take advantage of that easy access. Besides, as the weather starts to improve, you're going to be outside: playing golf, biking, boating, gardening, traveling.

Use this time while the cold still keeps us indoors to complete your financial resolutions or to have an overall financial tune-up. After all, you go to the doctor for an annual physical. Why shouldn't you have your financial health checked once a year, especially now when there may be fewer distractions?

The four big areas for examining your financial health are spending, borrowing, saving and managing risk. Addressing each of these interdependent areas would be part of a good tune-up.

Is your spending in line with your income, whether new earnings or pension? This may seem like an unnecessary question, but all of us can get caught at times spending more than our income. Sustained excess spending puts our future at risk due to increased borrowing or depleted savings.

Borrowing is an essential part of leveraging our income to purchase big items, such as houses, vehicles and college educations. Borrowing for vacations and weddings should be avoided. Carrying large credit-card balances is a serious risk. While you are still earning an income, loans and credit lines can be or should be paid off. What happens if you are leveraged to maximum and you lose your job? It is possible to borrow too much for your financial health. Ideally when you retire, you are going to want to be debt-free.

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