There's nothing like the fresh start of a new year to rekindle the flames of financial planning.
Now is a good time for investors to start thinking about their portfolios and for consumers to develop a working budget.
There's no doubt that the past two years have been difficult for many Americans. Thousands of workers who were sitting pretty just two years ago are now out of work.
And there's no question that the effects of the terrorist attacks of Sept. 11 will continue to haunt us.
So to begin the new year, here are some financial moves to consider.
The most logical strategy for consumers in an uncertain economy is to build up their cash reserves. The experts say that you should have three to six months living expenses in money that you immediately can access.
Because we're talking emergency situations, this should be a bare-bones budget, one without the frills of health club membership or eating out.
While you're building up your cash reserves, you need to concentrate on reducing your overall debt burdens. The money that you're spending now on fees and interest can one day be used to build your cash position. Despite the overall decline in interest rates, that hasn't been felt in many areas of consumer debt as credit cards are still well into double-digit rates.
In addition, as long as the economy is unsteady and there is a chance you could lose your job, you need to have your bills paid off. So while you still have a "guaranteed" source of income, take steps to eliminate that credit card debt and use the plastic sparingly.
As part of your spending plan for 2002, do a comprehensive evaluation of your insurance needs and coverage. While the focus for many was on life insurance, financial planners will tell you that you're far more likely to need disability insurance.
Unfortunately, that's something that many consumers go without, or have limited exposure.
At the same time, the baby boomer generation has got to start thinking about long-term care insurance.
With the start of the new year, many investors will be tempted to cut back on their investment spending. Although the stock market certainly has been unkind to investors the past two years, the last thing you want to do now is quit investing.
You may want to be a little less aggressive or you may want to diversify further, but you should keep on investing. With stock and mutual fund prices down as much as 20 percent, your investment dollars will go a little further.
And finally, it's a good time to get all your financial records in order.
A little organization now will pay big dividends down the road, and that's particularly true come April 15 when you won't have to be scrambling looking for your 1099 forms or trying to determine how much you paid in property taxes this year.
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