Point of View

Want a practical New Year’s resolution? Begin the New Year with a review of your financial goals. Here are some practical tips:

• Emergency savings. Do you have enough funds saved for unanticipated expenses? Although the amount varies by family, most experts agree that you need savings equal to three to six months of salary.

• Protection coverages. Do you have adequate personal risk coverage? Life and health are primary coverages, but other risk protections such as disability, post-retirement medical coverage, long-term care, estate planning, and property and liability coverage are important.

• Retirement savings. Retirement plan contribution limits increase in 2005. Increasing deferrals to your retirement plan reduces taxes, and you’ll benefit from the compounding of earnings. Don’t bypass an employer match and consider the power of a Roth IRA—tax-free distributions in retirement.

• Portfolio rebalancing. Experts recommend rebalancing your portfolio annually. Is your current asset allocation consistent with your risk tolerance, time horizon and retirement goals? Make changes as appropriate.

• College savings. The cost of a college education continues to increase. While many programs are available, the best plan for your family depends on your assets, child’s age, creditor protection, tax treatments, investment control, flexibility, etc. No one program works for all. Develop a plan and get started.

• Flex plan. Paying childcare and medical expenses with pre-tax dollars reduces your taxable salary and may qualify you for additional tax breaks such as education, dependent child and other tax credits.

• Tax records. Don’t procrastinate; start preparing now. Organizing your records makes tax filing a little less “taxing.” Keep in mind that if you claim a deduction for something, you will want to retain the documentation with your 2004 tax records—don’t toss it.

• Professional help. All of us need help with financial planning from time-to-time. Choosing the right financial organization calls for more than a “dollars and cents” decision. Qualities such as integrity, expertise, professionalism and financial stability, as well as a good return on your investments, are essential. Do your homework before selecting a financial advisor.

• Financial education. “No matter who you are, making informed decisions about what to do with your money will help build a more stable financial future for you and your family.”—Alan Greenspan. The Federal Reserve Web site, www.federalreserveeducation.org, is just one of many that offer useful financial information. Become a student of your own finances.

Sherre Stephens is a certified employee benefits specialist and director of executive and institutional benefit design for GuideStone Financial Resources of the Southern Baptist Convention.