FINANCIAL RESOLUTIONS FOR THE NEW YEAR

Be Creative

--Suggested by Judi Martindale, certified financial planner in San Luis Obispo

1. Use your credit cards only on Tuesday and Thursday. Doing so will cut down on spending and help prevent impulse buying. Because Tuesday and Thursday are workdays for most people, they are tired and spend less time shopping. Remind yourself that every time you use a credit card and fail to pay off the balance immediately you add as much as 20% to the cost of an item.

2. Find a “money buddy.” Read and discuss articles and books on personal finance. Use this as a support system much like finding a walking partner. Set a weekly savings or spending goal and be accountable to partner. Share money savings and investment tips.

3. Have older children provide proposals for spending for the next quarter. This teaches children how to budget. Allow parents to plan cash flow.

4. Match children’s savings. This allows children to take responsibility for college savings and material wants.

5. Give children an allowance. Put half of the money in savings, to be matched by the parent. And give 10% to church or charity. Put 10% in a family tax.

6. Have weekly or monthly family money meetings. Doing so allows everyone in the family to understand family finances. It promotes family partnership.

7. Start a home-based business. This can provide tax advantages and promotes an understanding of fiscal responsibility.

8. Give service gifts. Examples: I play the harp and have played for a friend’s wedding as my gift to the couple; one neighbor or friend offering another an evenings meal or a Saturday’s child care; give a massage to your partner; a teenager could give washing and detailing the car to his parents.

9. Put all change in basket at end of the day. Roll up the change occasionally and deposit in a savings account.

10. Find one item in your budget to squeeze by 10%. By reducing just one item, people are more likely to succeed.

Avoid Bankruptcy

--Suggested by David R. Hagen, a bankruptcy attorney with Merritt & Hagen in Woodland Hills and the new president of the San Fernando Valley Bar Assn.

1. Do not accumulate debt on high-interest credit cards. This sounds obvious, but it is the No. 1 cause of personal bankruptcy. Basically, a credit card is a 21% loan. These are very, very dangerous. I saw a credit card advertisement several months ago, they said it’s smart money. I thought about that. Maybe it’s prestigious, maybe it’s convenient, but it’s not smart. It’s dumb money.

2. Know your flow. That is, on a monthly basis, know and understand every month what comes in and what goes out. A lot of people have a chronically negative cash flow for many years and suddenly it builds up and they’ve got $30,000 or $40,000 on credit cards.

3. Don’t spend too much on housing. Don’t spend more than one-third of your take-home pay on housing. It’s tough to do in Southern California. We see people spending 50%, 60% sometimes even 70% of their take-home pay on housing. That’s too much.

4. Don’t spend too much on transportation. Again, this is hard to do in California. If we’re going out to do battle on the freeways, we need a pretty good car. But 20% of your take-home pay is what the experts recommend. I see people with $500 and $700 even $1,000 car payments. What’s the point?

5. Keep your overhead low. It seems like the theme of the 1980s was make and spend, make and spend. Not the 1990s. Keep everything in a reasonable proportion to your income. Stay away from financing refrigerators and those types of things.

6. Create two types of savings. The first type is six months of overhead. I call that the “Drop Dead Money.” Basically, if your employer wants you to do something unethical, immoral or illegal, you can say “Drop dead! I don’t need this job.” The other type is a long-term savings for retirement. Start saving now.

7. Act fast if you lose your job. If something happens to your job, go ahead and take a few weeks to recover. But then hit the ground running so you can get back into things. We see people out of the market six months, a year, two years and then it’s too hard to get back into the swing of things.

8. Don’t guarantee loans for others. So many times children come to their parents and say we want you to guarantee a car loan. And then there’s an accident. Don’t guarantee loans for anybody.

9. Always consider, what if? That is, what if my income stream goes away? What if my business drys up? What if I become incapacitated? What if I go berserk? Consider the appropriate types of insurance. You may feel kind of foolish setting up all the insurance and it’s costly. But frankly, it just makes sense.

10. Spend some time every day with some success literature. Put something good in your brain for 10 or 20 minutes every day. All day we talk to people and sometimes get negative things--”you can’t do this; you shouldn’t do that.” Or advertisers--”you need to buy this; you need this credit card.” Put in something positive. You’ll see the benefits in the long-term.

Remember the Basics

--Suggested by Consumers Union

1. Review and correct credit records: Call each of the three major credit bureaus and obtain a copy of your credit record: Experian (formerly TRW), (800) 682-7654; Trans Union, (800) 851-2674; and Equifax, (800) 685-1111. If you have been denied credit because of a credit report from one of these agencies, there is no charge for obtaining a copy of the record from that agency. If you discover an error, notify the bureau immediately in writing.

2. Shop around for insurance. Get at least three price quotes, and make sure that all the quotes are not from one independent agent, who may have loyalty to a particular company. The California Department of Insurance conducts price surveys for both auto and homeowners’ insurance. Call (800) 927-4357 for information.

3. Reduce your bank fees. Banks are increasingly charging higher fees for many services. To get the best deal, first determine your needs and habits. Ask the following questions: How many checks per month do I write? Can I meet minimum monthly balance requirements for waiving the monthly fee on an account? Do I use ATMs or need a teller? Do I need ATMs around town or just near home and/or work? Then, contact your current bank to see if there is a lower-cost account for your banking habits. Then shop around.

4. Reduce your credit card costs. The simplest way to reduce credit card costs is to pay off charge card debt every month. If you carry balances from month to month, you are borrowing money at interest rates from 8% to 20%. Paying only the minimum each month can keep you in debt for years. Consider this your top financial priority. You can obtain a lower rate from your current card issue sometimes simply by asking. RAM Research Group publishes a monthly report with the card rates of more than 500 banks. For the latest issue, send $5 to CardTrack, Box 1700, Frederick, MD 21702; call (800) 344-7714; or see the company’s web site at https://www.ramresearch.com

5. Fix finances. If you are having trouble paying bills, consider seeing a nonprofit consumer credit counselor, such as Consumer Credit Counseling Services, which has offices throughout the state and charges low fees for its services. Avoid so-called credit repair clinics, which are usually for-profit entities charging extremely high fees and doing little in return. For the CCCS office nearest you, call (800) 777-PLAN. If you are a homeowner, be wary of the temptation to consolidate debts with a home equity loan or home equity line of credit. There are always dangers to taking out a loan secured by your home, especially if you are already having trouble paying off bills. Indeed, some unscrupulous home equity lenders target homeowners with poor credit and an immediate need for funds. Such loans often have very high fees, result in higher debt, and may have an impossibly high balloon payment, all of which may lead to foreclosure.