Ringing in a new resolve


It's time to make your New Year's financial resolutions for 2005.

We can, for example, assume that Martha Stewart has resolved to take far fewer phone calls from her broker once she's released from jail. Insurance company executives likely promised themselves they'll delete all secret kickbacks from company policy to avert future scandals.

Corporate accountants are solemnly vowing to live by the letter of the tax law, never booking a sale before it is actually completed.

Movie moguls are committed to avoiding the risk of financial disappointment from such films as Alexander by reverently allowing the ancients to remain buried in history.

Though your personal issues may not be so high profile, everyone has financial traps and hangups requiring willpower. A new year is a logical time to become better aware of the financial world around us as we direct our families' finances.

Here are some worthy New Year's financial resolutions to keep:

I will get my credit-card debt under control by making all payments promptly and paying off existing debt.

The average U.S. household has a $7,745 revolving credit balance, which is $226 more than a year ago, according to CardWeb.com. By the end of this year, Americans will have charged an estimated $2.4 trillion on plastic, up from $2.1 trillion in 2003.

Interest rates and fees on cards keep climbing. The average interest rate on a credit card is 15.22 percent, versus 14.29 percent a year ago. The average late fee is $32.49, up from $31.24 last year. The average over-limit fee is $30.24, compared with $29.05 a year ago.

The best credit-card deals available nationally, according to CardWeb.com, are Wells Fargo Prime Rate Visa (800- 642-4720), $79 annual fee, 20-day grace period for payment and 4.75 percent variable rate; TNB Prime Plus Platinum MasterCard (800-820-8417), $50 annual fee, 25-day grace period and 5 percent variable rate; Pulaski Bank Standard MasterCard (800-980-2265), $35 annual fee, 25-day grace period and 5.5 percent fixed rate; and First Tennessee Classic Card Visa and MasterCard (800-234-2840), no annual fee, 25-day grace period and 5.9 percent variable rate.

I will follow closely all proposed changes to the federal income tax code and Social Security.

President Bush is committed to sweeping change in income taxes, as well as the introduction of personal investing for a portion of Social Security funds. This will be hotly debated. Since it affects your money, consider each and every proposal carefully. If any aspects don't seem fair or might damage your financial prospects, let your representative know what you think. Be a squeaky wheel when it comes to details about taxes and retirement.

I will set a course for the current investment environment.

It is likely that interest rates will rise in 2005, reducing the value of long-term bonds. So it makes sense to favor shorter-term bonds, money-market funds and stock mutual funds. The average yield on taxable money-market funds recently was 1.43 percent, according to the iMoneyNet fund tracking firm. Though it has risen a bit, it remains low. The average diversified stock mutual fund yield through the first 11 months of this year was 8.21 percent, according to Lipper Analytical Services. These are not the hot returns of the 1990s, but it still makes sense to own a mix of investments, because each performs differently at various times in the economic cycle.

I will find out as much as I can about those handling my investing.

Carefully research anyone you intend to trust for financial advice, whether financial planners, brokers, investment firms, mutual fund companies or insurers. Monitor those you're already working with. Those with the fewest regulatory problems are least likely to cause problems for you. Make sure that the investment strategy of the financial professionals fits your style. An investment is only good for you if it fits your risk tolerance, personal nature and time horizon.

I will set money aside for a rainy day.

Major layoffs continue, whether due to weakness in a company's results or because of mergers. Thousands of Americans received pink slips just before the holidays. Always have three to six months in salary set aside for emergencies. There were 1.58 million personal bankruptcies in the fiscal year that ended Sept. 30. While that's an improvement over 1.62 million in 2003 and reflects an improving economy, it is still a daunting number.

Retirement investment remains vital. Contribute the maximum amount you can to company 401(k) plans and other retirement vehicles. Keep the entire family informed of overall financial circumstances.

I will consider taking advantage of still low mortgage rates to buy a home or refinance.

Arguments over whether real estate values will boom or bust continue, but the truth is that rates remain historically low. The average 30-year fixed-rate mortgage recently was 5.71 percent, compared with 6.02 percent last year at this time, according to Freddie Mac. Mortgage refinancing represented 46 percent of mortgage applications this year, versus 60 percent in 2003 when the initial rate boom was going strong. If either buying or refinancing makes sense to you, there's no need to hesitate.

Andrew Leckey is a Tribune Media Services columnist.

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