Ask John:
Post Holiday Credit
T’was the night after Christmas, and all through the house,
not a creature was stirring…except for you when you get your
credit card bills from December.
This poorly modified opening to Clement Moore’s 1822 poem is
meant to portray the reaction that tens of millions of consumers
will have in about two weeks. That’s about the time that
your credit card bills will begin showing up and you’ll have
to begin dealing with those balances you ran up over the holidays. These
statements are sure to be a kick in the proverbial pants to many
of you and will surely lead to a slew of New Year’s Resolutions
regarding your credit and debt.
So please, allow me to lend a helping hand and point you in a direction
that will lead “to all a good night. ”
1. Get a handle on your credit scores – For
those of you who haven’t seen your credit scores in the
past 6 months then it’s time for you to take a look at
all three of your
credit scores.
I highly suggest that you start reviewing your credit scores
as often as you review your credit reports. Opinions vary on this
but I’d
suggest every 6 months, or at worst, every year.
2. Payoff any past due debts – If you’ve
got any collections or past due accounts then resolve to pay them
off this year, early this year if possible. Those phone
calls from collection agencies have to be getting on your nerves. Try
and settle the accounts or pay them in full and be done with them. You’ll
feel much better knowing you don’t
have that hanging over your head any longer.
3. Save more – Yeah, I know…everyone
wants to save more. This year do something about it. I
realize that saving money is hard but have you ever wondered why
it’s so hard for you? We all adjust our spending to our
paycheck amount and that’s dangerous because most of us will
spend almost all of it. Can I suggest that you take the
decision out of your hands and set up automatic withdrawals to a
Roth IRA, 401K or some other savings account? If it’s
done automatically then you’ll simply adjust your spending
based on the new paycheck amount…I promise.
4. Review Your Investment Portfolio – So
many of us think that the key to our financial future is investing. That’s
partially true. However you can’t leave your investments
on auto drive and expect them to always perform well for you. Review
you asset allocation at least once a year to make sure that you are
still balanced. If
you are getting to the age where you are less risk averse then it might be
time to change where your investment dollar goes.
5. Buy a house – Even with interest rates
going up and property values cooling off in many areas of the country…buying
a house is still the best deal on the block. Where else
can you buy something, get a tax deduction on almost the entire amount
of the payment and then keep 100% of the profits if you sell it two
years later? I’ll save you some time…you
can’t get that deal anywhere else. Plus living in your
own house with your own yard is simply the best feeling. Why
make a landlord wealthy when you can be building your own wealth in your own
house?
6. Don’t buy a new car – It’s
the worst purchase you can make. Where else would you buy something
that immediately loses 20% of its value (when you drive it off the
lot) and then ends up worth about 10% of the original purchase price
less than 6 years later? Keep your current car as long
as you can. I know we all want to ride in style but your
money is better off somewhere else, like a mutual fund.
7. Create a will – My wife lost her father
a few weeks ago and it was amazing to see how helpful his will made
all of his final arrangements. I, for one, am not even
in the same ballpark as he was but I will be as soon as possible. Can
I suggest that each of you create a simple will so that in case something
horrible happens to you this year that your finances are handled like you
want them to be handled rather than the state handling them for you?
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