Getting Fiscally Fit In 2007

New Year's resolutions are in full swing, and while many vow to lose pounds and get in shape, Reginald Bowser, personal finance expert and CEO of RolloverSystems suggests Americans need to get fiscally fit. He reveals the top five financial mistakes people make and offers tips to help people start off the year on the right fiscal foot.

New Year’s resolutions are in full swing, and while many vow to lose pounds and get in shape, Reginald Bowser, personal finance expert and CEO of RolloverSystems suggests Americans need to get fiscally fit. He reveals the top five financial mistakes people make and offers tips to help people start off the year on the right fiscal foot.

The average 40-year-old professional can have as many as four or five 401(k) accounts left with former employers. This is a huge problem. Roll them up and take control of your retirement money

1. Attack Credit Card Debt … It’s Killing You.

“No one should have more than two credit cards, and your total outstanding balance should never be more than 30 percent of the total credit between your cards,” said Bowser.

Americans are fresh off holiday spending. But most of it was on credit. In fact, according to the Federal Reserve's latest Survey of Consumer Finance, Americans owe about 10 percent more on credit cards now than they did in 2001. Pay down your balance monthly, if possible. Also, seek out the best interest rate credit card companies (bankrate.com offers objective listings of card rates and information for free), and make a plan to move to the lowest rate card you can find.

2. Gather The Troops … Having More Than One 401(k) Account (Or Worse, No 401(k) Account).

“The average 40-year-old professional can have as many as four or five 401(k) accounts left with former employers. This is a huge problem. Roll them up and take control of your retirement money,” said Bowser.

It goes without saying that the earlier you start saving in a 401(k), the better off you’ll be for retirement. But people switch jobs an average of 11 times in their career, and often old 401(k)s are left behind or forgotten. This is one of the biggest silent issues facing today’s professional. Make sure to roll over these 401(k) funds into one IRA, which will help you keep track of your funds while giving you greater control of the way your money’s invested. After all, you left your old place of employment, so why let them manage your money?

3. Never Carry More Than One Car Payment Each Month.

“For families, never have more than one outstanding car loan, no matter how affluent you are,” said Bowser. “Even with two or more cars per household, paying in cash or paying off a car before assuming another loan will free you up to save more.”

It may seem like “The American Way” to purchase new cars, but the debt you incur from car loans can really add up. Limit yourself to only one car payment, and put aside some extra cash to use for your next car or for regular maintenance issues that arise. And when shopping for a new car, forgo the desire to get the latest brand-name car with all the bells and whistles, and instead focus on getting the vehicle that will really suit the needs of your everyday life.

4. Saving Less Than Three Months Salary For Emergencies.

“Our lack of savings is a cancer,” said Bowser. “According to the Bureau of Labor Statistics, Americans’ personal savings rate became negative in 2005 for the first time since the Great Depression, and it’s not getting much better.”

Rule of thumb: put aside ten percent of disposable income – first in cash until the equivalent of three months’ salary has been saved, and then in higher yield investment instruments. Start with small steps (bagged lunches twice a week, eliminate two lattes per week), committing what you can. Automate regular payments against your cards and work up the amounts as you can afford to over time. Saving a little at a time can profoundly alter your financial destiny.

5. Don’t Get Financial Advice From Aunt Helen.

“Everyone should have a financial advisor. Everyone,” said Bowser. “Even if it’s someone you contract hourly to meet with you once per year.”

People manage their own funds all the time, but that’s not always the best way to make your money work the hardest - and smartest - for you. There are a plethora of investments and new rules to follow, and most people simply don’t have the time or energy to comprehensively investigate the best options for their financial situation. Friends and family also mean well, but they’re in the same boat. Ignore the myth that only the wealthy can afford a financial advisor, and team up with one you trust who will help take your funds to the next level.