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Financial Stability: Practical Tips

by Suzann Kale

No matter what's going on around us, we can take steps to keep our small financial corner of the world a little safer. Here are some ways:

1. Diversify everything. Not just any market holdings you may have, but your bank accounts, insurance protection, savings vehicles, and retirement accounts.

Examples. Keep your checking account at a different bank than your savings account. Keep any bank CDs or money market accounts in yet a third bank, financial stability and your retirement account in yet another institution. (Make sure each bank you choose is solid. You can check a bank's status at
http://www3.ambest.
com/banks/
BankSearch.aspx - just fill in the bank's name rather than trying to fill in the whole form.)

If you can afford it, you can also diversify your actual holdings. If you have a house or condo, you're already diversified. Some people hold gold coins (don't buy gold at an inflated price, just put the money aside and buy gold when the price is right for you), some diversify by putting some money in a mutual fund.

Yes, this means more paperwork - but many experts believe it's worth it not to have all your money in one place. Plus, most accounts can be managed online at no extra charge, and this will minimize incoming paper statements.

2. If possible, increase the amount of money you put into savings each month. If your employer does this for you via a retirement account, you may want to open an account of your own into which you dump a percent each month of your salary. This could take the form of a Health Savings Account, or it could be money you put aside each month for heavy annual expenses such as property taxes. It could be a mad money account to spend on dinners out rather than using a credit card, it could be Treasury Bills (available through your broker) labeled for a future expense, such as night school or annual fall clothes shopping for the children.

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The beauty of putting a set percentage aside each month is that no matter how small the actual amount, it so adds up. Not that we're getting any interest on our accounts to speak of these days, but the cash itself adds up - you'd be amazed. Plus this act of religiously taking a percentage out of your monthly salary eventually becomes a habit. A savings habit.

3. Try not to borrow against your home. Make that kind of borrowing a last resort. Your home is almost a priceless asset and you don't want to do anything to weaken its strength.

4. Many people take advantage of offers to transfer your credit card debt to another company that will charge you little to no finance charges for a period of time - usually 6 months, sometimes a year. The catch here is: a)read the fine print, and make sure you understand exactly how they operate, and what you are charged for new purchases made on the card, and b)make sure the new credit card company is reliable. (You can check on a credit card company's status at http://www.creditcards.com/excellent-credit.php.)

5. Many of us have a tendency to put off our monthly bookkeeping and check balancing. This is no longer an option. We must be disciplined about keeping our accounts up to date. Many institutions require you to notify them of mistakes within a certain period of time. If you wait 6 months before balancing your checkbook, you could be in trouble if you find a bank error.

You need to be organized, either through a bookkeeping method of your own, financial stability or a spread-sheet, or a software package, and know what your financial status is every day. Keep your account numbers and balances in a safe place.If they're on your computer, make sure they are a) password protected in case your computer gets stolen, and b) backed-up, in case the computer crashes.

Keep important financial documents such as your deed or car title in a fireproof box or a bank safety deposit box.

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