So, exactly how many of your 2007 financial resolutions have you followed through on? I thought so.
You promised yourself this year would be different, but somehow you've made it to the midyear mark and haven't crossed off many of your financial to-dos. It was probably just a wish-list you kept in your head anyway, and you've now conveniently banished it from your memory.
I'm not here to beat you up about what you haven't managed to do over the past six months, though. Instead, I have a proposal: Try these five financial moves that'll make you richer and remorse-free when the end of the year rolls around. You can easily knock them off between now and next New Year's:
• Get paid for saving
The average bank checking account pays less than 1 percent interest these days, if it pays any interest at all. At the same time, you can earn about 5 percent in a savings account, CD, or money market account.
There's no reason to leave more in your checking account than is necessary to pay your bills. That's different from a few years ago, when there wasn't much of a gap between what you could earn on different types of accounts.
These days, you should move any "extra" in checking into a true interest-bearing account; I wouldn't settle for less than 4 percent. If you manage to snag a 5 percent rate, on a $5,000 balance you're looking at making an extra $250 a year.
• Boost your 401(k) contribution
You know my position on this: If you're limited on funds, always invest just enough in your 401(k) to get the company match, but not a penny more. Then focus on a Roth IRA if you're eligible -- that is, if in 2007 you have a modified adjusted gross income of up to $114,000 for individuals and $166,000 for married couples filing a joint return.
If you aren't eligible for a Roth, or already have it funded, by all means add more to your 401(k). The standard max is $15,500 this year, or $20,500 for those over 50. The truth is that most people don't come near to maxing out on their contributions; the average contribution is typically less than half the annual limit.
This is especially true of folks who haven't previously participated in their company plan, but have been automatically enrolled by their employer. Automatic enrollment is a good thing, but it has a hidden trap: Typically, employers set the automatic contribution level at just 2 percent or so of salary. In many plans, that's not enough to qualify for the maximum company match.
Push yourself to contribute as much as possible to your 401(k). And for those of you under 50, check to see if your employer offers a new flavor of 401(k) -- the Roth 401(k). You lose the upfront tax break on your contribution with a Roth 401(k), but just like a Roth IRA, your entire account will be tax-free when you make withdrawals in retirement. That can be a huge advantage over a standard 401(k), where withdrawals are taxed as income.
• Rebalance your accounts
There's no excuse not to rebalance money invested in a tax-deferred account -- you can buy, sell, and exchange shares without a tax bill. Rebalancing is especially smart right now, with the markets looking shaky after some strong performance.
Trimming your winners and adding to the assets that have lagged is a smart way to keep your investing head. For example, international stocks have been on a roll since 2002, outperforming the S&P by a huge margin.
I'm not suggesting you get rid of international stocks after their strong run. But take a look at your portfolio and think about trimming it back if the percentage allocated to international stocks has grown way beyond your target.
• Trust yourself
A revocable living trust with an incapacity clause is the single smartest estate planning move for the vast majority of Americans; it's not just for the super-rich. But here's your midyear challenge: Focus on a trust now.
Whether you use software or work with an estate planning lawyer, if you start now you should be able to have everything in place, including your advance directive and durable power of attorney for health care, before the end of the year. You could also have the trust funded.
For those of you with far-flung family members who get together at the holidays, making it a goal to have your papers all set before they show up will give you the opportunity to talk face to face with them and explain your estate plan. Letting your family know you have everything in place -- and explaining your health care choices if you become too ill to speak for yourself -- is one of the most loving gifts you can give them.
It shows concern for their well-being, as well as respect. Rather than leaving it all a mystery, or doing no planning at all, you'll have taken all the necessary steps to ensure a smooth handling of your estate if you become ill or die unexpectedly.
• Price a new life insurance policy
If you bought a term life policy at least 5 to 10 years ago, and remain in good health, you should take a few minutes to price the cost of replacing that old policy with a new one. Over the past decade, term premiums have plummeted about 50 percent, so you could be able to save a nice chunk of money by switching to a new policy to cover the remaining years of your current policy. One crucial step here: Don't cancel your old policy until you have a new policy up and running.
For those of you who made buying life insurance one of your 2007 resolutions, what's holding you back? Buying term life insurance -- which is the only type of insurance I recommend for the vast majority of individuals -- has never been cheaper and easier to do.
You can shop online at sites such as AccuQuote or SelectQuote, and you'll be amazed at how cheap protecting your family can be. For instance, a $500,000 policy for a healthy 40-year-old man can run just $500 or so a year.