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10 tips for financial security

New Year’s resolutions are made to be broken. By hour 14 of 2006, you have already abandoned those vows to establish financial goals, to spend as wisely as Benjamin Franklin, and to channel money into investments as efficiently as Wal-Mart distributes Cheetos.

So forget about those impossibly grand ideas. Instead, here are 10 easy ways to ensure a more secure future.


Boost your savings.

The savings rate of Americans is currently a disastrous -1.5 percent. If you have a 401(k) or other retirement plan at work, go to your benefits department and raise your contribution by at least 1 percent; you’ll never miss it. If you receive a raise, promise to have half the total automatically deducted from your paycheck and placed in your retirement plan.


Put some money in the bank.

Annual rates on one-year CDs are hovering above 4 percent. Anytime you receive a bonus or some other windfall, plunk it in one. You can find top rates at two Internet banks: ING at www.ingdirect.com (APY 4.4 percent, no minimum) and Nexity Bank at www.nexitybank.com (APY 4.75 percent, $1,000 minimum).


Review your homeowners insurance.

Rita, Wilma, and Katrina have brought home the message that your insurance policy should reflect the current value of your house. Making sure that you have the right value is more important than ever, because some insurers set caps on the total they’ll pay at 120 to 125 percent, at most, of the home’s insured value. You’re on the hook for anything more. Homeowners policies do not cover floods, however. To learn whether your house is in a flood-prone area, go to www.floodsmart.gov. You can buy insurance from the Federal Emergency Management Agency’s National Flood Insurance Program through private insurers. The NFIP policy will pay up to $250,000 for your house (and $100,000 for the contents), but if it’s worth more, you can buy excess flood coverage from, among others, Chubb and Fireman’s Fund.


Get out of credit-card hell (fast).

First the don’ts: Don’t transfer your balances to another card that promises a 0 percent annual rate. You may pay a fee equal to 3 percent of the amount transferred, which lands you more deeply in hock. And refinancing your house to pay off cards will cost you 30 years of interest on the pizzas and sneakers of yesteryear. Instead, list all your debts. Pay those with low balances immediately. Then focus on the cards with the highest rates. Pay at least double the minimum on all of them. If you can’t make minimum payments, call the credit-card company immediately and try to work out a plan that stretches out payments.


Move to a fixed-rate loan.

Rates on adjustable-rate mortgages and home-equity lines of credit have risen about 1.5 percentage points in the last year, and if analysts are correct, they’ll rise some more. If you are financing your home with one of those puppies, it’s time to convert to a loan with a plain-vanilla fixed rate. Look for one with no points and no closing costs. To compare loans, go to www.hsh.com or www.bankrate.com.


Use the new energy tax credits.

Credits are much better than other tax breaks because they are subtracted directly from your tax bill. Starting in January, a batch are available to homeowners who, among other things, install solar energy for water heating or electricity (30 percent of the cost up to $2,000). Other credits: insulation (10 percent of cost) and electric or geothermal heat pumps (up to $300). The total cap on the last two improvements is $500. You can also get a tax credit on a new hybrid car (a maximum of $3,400 for an 8,500-pound car). You may have to buy early in the year because the credit is limited to 60,000 vehicles per manufacturer.


Give yourself a budget cut.

Trick yourself into spending less by having a set amount, say, $50 a week, deducted from your paycheck and deposited in a bank or credit-union savings account. (Or have a mutual-fund company extract money from your checking account.) If an emergency pops up--say, an unexpected car or dental bill--you can draw on your trove instead of using a credit card. If the balance piles up to more than three to six months’ worth of income, deposit the excess in a stock index fund that tracks a broad market index, such as the Standard & Poor’s 500. The Vanguard 500 Index Fund and the T. Rowe Price Equity Index 500 are among those with no sales commissions and low annual expenses.


Automate bill-paying.

By setting up an online bank account with automatic payment for regular bills, you can avoid late fees forever. At most banks, you simply enter the date you want the mortgage or the car payment made each month and the amount. You can even set a regular low payment for your credit cards, enough to avoid getting whacked with a late fee.


Audit casual spending.

Use your debit card to see where your money goes. Once you spot the budget leaks--bookstore binges, gourmet-tea purchases, lotto tickets--you should be able to plug them.


Unload bad investments.

If you would not buy the stock or fund today, and it’s no longer performing on a par with similar investments, sell. For a stock, look at its Income Statement (available at finance.yahoo.com), find “operating income,” and divide by total revenue. Then do the same for its closest rival. If it’s lagging, say adios. For mutual funds, go to www.morningstar.com, click on Funds, and then on Category Returns. It provides the average returns for periods from 3 months to 5 years. If your fund is above the middle, hang on.

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