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July 03, 2011 | money-management

5 Habits of the Financially Fit

  1. Set & review your goals. Chances are you already have some financial goals. Get them on paper and make them part of a larger picture. When you lay out your financial goals, make sure you look at the long term, not just your immediate wants and needs. Review your goals at least once a year. Your priorities may change depending on what's going on in your life.
  2. Tackle your day-to-day finances. Making a budget -- and sticking to it -- is easier than ever, thanks to technology. Check out our easy Budgeting Tips and Tools for calculators and a budget spreadsheet to get you started. Another easy way to save is with Ample Change, which rounds up the amount you're putting on your debit card to the nearest dollar and puts the change in your share account.
  3. Pay down your debt. When setting up a plan to reduce your debt, there are two things to consider. First, some debt, such as a mortgage or credit cards, can often be refinanced at a lower interest rate. This can lower your minimum payments and save you money over the life of the loan. The second thing to look at is which loans are the most costly. The higher the interest rate, the faster you want to get rid of the debt.
  4. Don't forget your investments! Many of us find it stressful to make investment decisions, and once we've allocated our funds we just let them be. It's a good idea to do an annual review of your investments, on your own or with a financial advisor, to make sure you're allocating your investment funds appropriately in light of changing markets and life events. Make sure your portfolio is diversified with a mix of high risk/return investment and safer/lower yielding investments that you feel good about.
  5. Take care of the paperwork. Two things most of us would rather ignore are insurance and a will. But spending a little time on them can put your mind at ease. Ask yourself if you have the right kind of insurance for the right amounts, and if you're paying a fair price for it. It's always good to shop around each time your policies renew. Premiums for auto and home insurance are highly impacted by the deductible you choose. Be sure your deductible is an amount you'll be comfortable paying should you need to file a claim. If you don't have a will and a living will, it's time to get these critical documents done. If you already have a will and a living will, any change in your life situation, such as marriage, a new child, or a move is a good time to review both and see if you need to change any of your choices.