6 Money Matters to Stop Worrying About

June 30, 2008 at 10:43 am Leave a comment

I’m not a huge fan of Suze Orman. In fact, not much of one if I’m being honest. But, her latest feature in O at Home was one of the few Orman tidbits I can’t argue with. Simply put, it’s the soundest advice I’ve heard from her in a long time. Here’s how the article starts:

Falling home values. Soaring oil prices. Sputtering stock markets. A declining dollar. It’s enough to try even the most optimistic souls. My advice for coping: Ignore it all. Yes, you read that right. If you have a solid financial plan in place, there’s no need to lose sleep over today’s headlines.

She continues with a list of 6 financial items she recommends for people to just ignore. Here’s the list:

1. The value of your home

So…get a grip on what really matters—the long-term performance of the housing market. Even when you figure in the past year’s 10 percent dive, the national median price for existing homes has gained nearly 25 percent over the past five years, according to the National Association of Realtors. Over time, housing will revert to its historical norm: an average annual appreciation rate about 1 percent above the inflation rate.

2. Your investment portfolio

Over the life of the stock market, stocks have gained, on average, about twice as much as bonds or savings accounts. The biggest mistake I see people make is to panic and bail out when the stock market falls. That exposes them to another risk: missing out on its recovery. Don’t stop putting money away for retirement, either. Think about it this way: Investing in your 401(k) when the markets are down is akin to hitting the outlet mall—you get more for your money.

3. Your credit score

Ignore all those TV commercials threatening you with financial ruin if you don’t sign up for a credit-report service. There’s no need to bother with all that. As long as you review your credit-card statements every month for unauthorized charges, you only need to check your credit rating once a year.

4. Unnecessary insurance

..there are plenty of (insurance) industry come-ons you can ignore, now and forever. For example, it makes no sense to buy life insurance for a child or for an adult without an income. You only need life insurance for an income-earner who is responsible for dependents.

Other insurances to skip include:

  • Mortgage life insurance – it pays off your home if you die. It’s more simple and cost-effective to take care of this through a term life policy.
  • Credit-card-loss insurance – If your card gets stolen, lost, or you become a victim of identity theft, your maximum liability is $50.

Similar items to ignore are extended warranties offered by salepeople when purchasing big-ticket items.

Consumer Reports recently took a detailed look at these and concluded they are typically a bad deal for consumers. That’s because most products don’t break down in the first few years, and if you have a complete lemon out of the box, you’re going to be covered by the standard one-year warranty you get with most purchases.

5. Paper records

This is for all the statement hoarders and receipt keepers whose filing cabinets and closets are bursting with documents from the last century: Let go.

Keepers:

  • Big-ticket receipts – TVs, cars, and sofas
  • Receipts for major home improvements

Shred:

  • Paycheck stubs – you can toss out paycheck stubs once you’ve verified that your W-2 is correct
  • Old tax documents – the IRS will only go back 6 years for most audits, as long as you aren’t committing fraud, you’ll be okay
  • Investment account(s) statements – for savings accounts, 401(k) plans, and other investments
  • Credit card and ATM receipts – check your monthly statements to make sure everything is correct

6. College costs
Why should you ignore college costs for your kids?

It’s simple: You should focus on your retirement, not your kids’ college costs. There’s plenty of financial assistance—about $130 billion every year, according to the College Board—to help pay for your children’s education. But there are no federal loans or scholarships to help out people who haven’t saved enough money for retirement. Make it your priority to build financial security for retirement, and I promise that when the time comes, your kids will be grateful that you don’t need to rely on them.

Don’t forget that it’s alright for your kids to work while they’re in college. Maybe it would help some of these kids to actually invest in their education aside from attending classes. They’ll be more likely to decide on a major that’s not beer drinking if they’re paying out of their pocket.

Closing Note

he single most powerful way to ease your concerns is to stop trying so hard to impress others with your money. Take good financial care of yourself and your family, and I guarantee that you will have much, much less to worry about.

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Entry filed under: College Planning, Credit Bureaus, Credit Cards, Identity Theft, Insurance, Real Estate and Mortgages, Retirement, Saving and Investing. Tags: , , , , , , , .

Some people just don’t get it I busted our budget

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