Do It Later
(MONEY Magazine) – Certain resolutions don't fit the one-time, start-of-the-year model. Some, like the three that follow, are instead ongoing projects best addressed later in the year. Besides, you can't tackle everything at once. So rip out these pages and put them where they'll hit you in the face in a month or two--tacked on to a calendar, maybe, or among your important tax papers. Next time you see them, you'll be ready to complete your 2006 money wish list.
RESOLUTION EIGHT 8 Get Healthy, Save Money
These days the classic New Year's get-healthy resolution--shed those extra 10 pounds, kick the nicotine habit, dust off the old gym membership card--has been joined by a new one: Lower those out-of-pocket health-care costs. In this case, one action plan will help you reach both goals, since adopting healthier habits throughout the year should automatically trim your medical bills as well.
1 | Take Small Steps (But Lots of Them)
A classic mistake and a sure path to failure for all get-healthy resolutions: setting the initial bar too high. Instead of pledging to, say, hit the gym every day or lose 25 pounds this year, commit to a few relatively minor changes and build from there. Examples:
• Drink light Switch from whole milk to skim in your morning cereal or midday latte. Your savings: 100 calories a pop.
• Take it straight Or give up the fancy brews as a matter of habit. A grande Mocha Frappuccino at Starbucks contains 290 calories; the same-size version of its Americano coffee has only 15.
• Step up Boost the number of steps you take--pace while you're on the phone; use the stairs, not the elevator; park farther from your office. The goal: 10,000 steps a day.
• Puff less Eliminate your after-dinner cigarette for two weeks, then cut one more smoke a day the following two weeks and so on.
2 | Get Free Help
To keep their own health costs down, a growing number of companies are offering new benefits to help keep their workers out of the doctor's office. So check with your human-resources department to find out what free health help might be available to you. Some possibilities:
• Free checkups Nearly half of large employers now offer free health-risk assessments to head off potential medical problems.
• Behavior modification programs About 30% also sponsor weight-loss classes, quit-smoking clinics and similar programs.
• Fitness discounts A growing number of big companies provide discounts on sports and gym equipment, spas, fitness classes and similar activities that promote a healthier lifestyle.
• Financial incentives Signing up for healthy-behavior programs may qualify you for a modest cash bonus (typically $100 or less) or for lower premium contributions and co-payments on your health plan.
3 | Reap the Rewards
Once you've dropped the pounds and kicked the nicotine habit, try reapplying for life insurance. Healthy people routinely pay lower premiums: For example, a 45-year-old healthy man can expect to pay $650 to $750 a year for a $500,000, 20-year term policy vs. an outlay of $2,500 to $2,700 for a 45-year-old smoker who is overweight. --CYBELE WEISSER AND ALISON STEIN WELLNER
The Cost of Bad Habits
$900 Additional annual medical costs for a typical obese person vs. someone of normal weight
$1,600 Additional annual health-care costs, on average, for a smoker vs. a nonsmoker
SOURCES: RTI International, Centers for Disease Control and Prevention.
RESOLUTION NINE 9 Cut Your Taxes
Americans routinely let many valuable tax breaks go unclaimed. For instance, a 2002 government study found that up to 2.2 million taxpayers overpaid, by an average of $438, because they claimed the standard deduction instead of itemizing. Here's how to hold on to what's yours.
1 | Invest in an Accordion File
Many taxpayers may have settled for the standard write-off because they didn't have the proper backup for deductions. The answer: Get a shoebox or large folder, and as soon as you get any document that might be useful at tax time, throw it in. Include:
• YOUR REAL ESTATE TAX BILL and mortgage interest statement
• RECEIPTS FOR CHARITABLE CONTRIBUTIONS and unreimbursed business expenses (including travel and entertainment costs)
• BROKERAGE STATEMENTS documenting investment losses.
2 | Take the Write-Offs
If your deductible expenses exceed the standard deduction that the IRS allows--$10,000 for joint filers for the 2005 tax year--it's probably worthwhile to itemize. In addition to biggies like mortgage interest and property taxes, you may be able to deduct:
• INVESTMENT COSTS such as IRA and brokerage account fees
• JOB-HUNTING EXPENSES, plus dues to professional associations
• TAX ADVICE FEES, plus the cost of preparing your return. If itemizing seems too hard, buy software like TaxCut or TurboTax (cost: around $30), which does everything but hold your hand as it walks you through the process. Or hire a pro to itemize for you.
3 | Maximize Pretax Savings
No move will save you as much as funding tax-advantaged savings vehicles and flexible spending accounts. If you have an effective tax rate of, say, 33% and put $10,000 a year in a 401(k) and $5,000 a year in an FSA, you'll pay $5,000 less come April 15. Plus, it's easier than ever to use FSAs since many health insurers now report your out-of-pocket costs directly to plan administrators, which then reimburse you with no further paperwork. --TRACY BYRNES
RESOLUTION TEN 10 Invest Smarter, Part II
You've set the perfect investment plan in motion (Resolution No. 2). But over time, as markets rise and fall, that ideal allocation will get out of whack. The solution: Get back on course by periodically selling some winning investments and buying more of your laggards.
1 | Make It Routine
Rebalancing your portfolio by lightening up on winners and buying more of investments that have fallen behind feels counterintuitive--and that alone stops many investors from doing it. To get over the mental hurdle, turn rebalancing into a regularly scheduled, unthinking exercise:
• Set a date Choose one day a year to review your allocations (say, midyear, July 1), mark the date on your calendar and stick to it.
• Get a reminder Check with your fund company or retirement plan to see if it will give you an online nudge at a preset date.
2 | Get a Before and After Shot
On Rebalancing Day, first check out the changes in your portfolio:
• Make a pie Go to your retirement plan's or investment firm's website, where you should be able to generate a chart of your holdings broken down by asset class.
• Do a comparison Any category that is off by more than five to 10 points from your target allocations is a candidate for rebalancing.
• Get the big picture If you have multiple accounts, get a consolidated view of all your holdings by inputting your investment info at Morningstar.com, which offers a free tracking tool.
3 | Fix Your Mix
To get back to your ideal allocation, you'll need to:
• Sell some shares Lighten up on assets that gained in value, and buy shares of those that fell behind. You can also purchase new shares of holdings that lagged.
• Get a hand Many retirement plans offer a Web tool that allows you to input your target percentages and hit enter; the plan administrator then executes the necessary trades. And customer service reps at most financial firms will, at your request, crunch the numbers and help you rebalance while you're on the phone. Either way, the whole process shouldn't take more than 20 minutes. --T.K.
If you'd prefer to have a pro do the dirty work of rebalancing for you, consider a life-cycle fund. These funds offer a preset mix of stocks, bonds and cash and adjust their allocations over time. You choose the mix based on when you need your money back.
T. Rowe Price Retirement Funds 800-638-5660 Vanguard Target Retirement Funds 800-851-4999