The James Dicks Blog

I wish everyone a very joyous and profitable 2010, but in order to make it profitable, you must start planning. I’m not going to tell you to make resolutions for the New Year (resolutions normally fall by the wayside very quickly anyway), but rather organize and design a positive strategy to actually change your habits and develop individual goals. This kind of action will better secure your success in obtaining meaningful returns in 2010 through a meaningful reorganization of your financial life.

Goal setting is the top priority. Determine specific and attainable goals, short and long term, and make sure you write them down. Physically writing them down gives them power. The act of writing and visualizing your goals makes it much more likely that you will actually achieve them.

You must also understand your current financial situation. Add up your assets and your liabilities. Find out how much you owe on your home, your cars and your credit cards and conclude how best to whittle those liabilities down a bit during the year ahead. It’s always a good idea to get rid of debt, especially high interest debt. The beginning of the year is also a great time to establish any new insurance needs. Examine the validity of your current life, disability, home, health or auto policies and decide whether changes are required.

The best way to create a solid financial plan is to save, save, save. The general rule is to put away 5 percent to 10 percent of your take-home pay, if you can. Remember to pay yourself first and don’t wait for what’s left over after you pay your bills. If that’s your strategy, you’ll find it difficult to save anything. You should also be sure to set aside your savings in an interest-bearing account, such as a money market account, or in a tax-deferred account like an individual retirement plan (IRA). If your company offers a 401(k) plan, start contributing as soon as you possibly can, especially if the company matches your contributions. Once you’ve finished the basics, then you can start examining your portfolio and other investment opportunities.

Something else to pay close attention to is your tax strategy. When you receive your annual W-2s, make sure your monthly tax payments are being deducted at the proper level. The trick is to come as close to breaking even as possible on your federal tax returns. You should keep and invest your money throughout the year rather than allow the government to use your hard-earned cash.

There are an almost infinite number of financial topics to consider but the bottom line is getting the education you need to determine what you need to do to establish a positive financial position for 2010. Go to the library and check out books that deal with the financial issues you are most interested in (plus, you’re already saving money by checking the books out of the library rather than buying them). Subscribe to magazines, listen to radio, watch television programs that explain the financial news of the day and surf the Internet. There are so many top-notch areas where you can find the information you need to educate yourself about your financial situation. You might even take a course at the local community college or university. Remember, it doesn’t matter how old or young you are, now is the time to start improving your financial situation.

Again, I’d like to wish you a Happy New Year! You will increase the chances of experiencing a joyous and profitable 2010 if you constructively plan for your financial future.

Happy Investing!

One of the major effects of the current economic downturn is that many people are putting their credit cards away and only using cash to make all their daily purchases. I know that the American population has a long way to go before it will totally accept such a radical premise as a cash-only existence. But the situation we now find ourselves in may make it the better way to live day-by-day, at least at the personal level. But with the recent changes in the credit card industry and the increase in interest rates, more and more consumers are now using cash (and that includes debit cards) to make their important daily purchases.

In 1950, Diner’s Club issued the very first “plastic money” to a very small consumer base; about 200 customers who used the card at 27 restaurants in New York City. By the late 1950’s the credit card industry really changed how we handled our spending habits and buying on time became extremely popular, if not the norm among the population in the United States. In 1959, it was the Bank of America that issued the very first, truly universal credit card but only in California but by the mid-1960’s their card was available for use on a coast-to-coast basis.

So what’s your plan for 2010? If you decide that a cash-only lifestyle is how you want to live the rest of your life, you must first create a budget. That is the key to making this whole plan work. You must know how much you need to spend in any particular area. A budget is the simplest form of a “cash-in and cash-out” system and by using only the money that you have on hand has a way of encouraging you to not spend what you do not have; which runs contrary to all of the hype that you see for credit and credit cards in our American society.

Those who have already started using cash-only have experienced a real decline in their spending. That’s because they are only spending money in their personal or small-business banking accounts. By using a debit card, you still have the convenience of using a card while not being encouraged to spend more than you have. You now have a limit and you have a financial plan in the form of your monthly budget.

Some people argue that if you don’t have credit, you can’t build your credit rating but that’s not entirely true. There are methods of building your credit without a credit card but most times this will include borrowing money. You might get your car financed, and then pay off the entire amount after a couple of months. You may also consider getting a secure credit card (which is really just a debit card that is reported to the credit bureaus) to help you build a credit rating without using true credit. But be very careful when it comes to the fees they charge; many are very high.

Another interesting sidebar of living without credit is that people who are doing so have noticed they are sleeping better at night knowing that they don’t have a mountain of debt weighing on them. If you are mentally healthy then chances are you will also become physically healthy too. Stress is everywhere in life and if you can rid yourself from the stressful situation of a debt load then that’s all the better for your personal well-being.

Finally, as you are learning to live within this new, cash-only lifestyle, make sure you teach your kids about money. I don’t know if you’ve noticed, but the various school systems around the nation, from elementary to college; just do not do a good job of teaching our young people about their finances. Because of this, they take a large amount of financial ignorance into their personal lives and the nation’s consumer economic problems are perpetuated. So, using common household lessons, teach your kids about money and credit. Put that at the top of your New Year resolution list.