A New Year, A New Attitude

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With 2011 safely behind us, it's time to think about the New Year. Why not begin thinking about success?

The definition of success is different for everybody. Some base it on money, some on love. Some define it by how much you own (he/she who dies with the most toys wins) and some don't define it at all- they just live in the moment. I am a great believer in quality of life: do the best you can with what you have to work with. Money does not necessarily dictate how you live your life, although I agree, it does help. As a Trusted Advisor and Certified Financial Planner®, I am asked the question "How am I doing in comparison to everybody else" relatively often. I point out that we are all individuals, with individual lives and circumstances, and that it's not a contest. We all have a different standard of living, and varied expectations of what we want out of life, financially speaking. A lavish vacation for you may be a long weekend for another, a "big" house for one may be far too much room for the next person. We are all different- it's not a competition. I do however, point to three basic rules that I believe apply to everybody for their quest for financial success coupled with a great quality of life. Consider the three (yes, three–ask Rick Perry to count 'em!)

Be Debt Free
Setting aside your mortgage and car payments (if you have them) this is the year to be debt free. Think carefully before whipping out the charge card this year, and be sure to pay more than the minimum payment. Although it may seem very low, the reason is relatively low interest rates. Here's the secrettake advantage of it. Every dollar you pay above the low minimum payment goes to principal. This allows you to pay off the card much faster than if the interest rate was higher- since now more of your payment goes to principal. If you have more than one card, use one as sparingly as possible, and put the others away. Look at the outstanding balance and divide it by 11- here's your new fixed payment for the rest of the year, assuming you don't use that card in 2012. Why divide by 11 payments? Each of the next 12 payments will be a little higher than if you divided by 12, allowing for the interest. If you can pay more, do so. And don't forget to celebrate when you pay off a card- give yourself the time to feel good about getting rid of the creditor.

Max Out your Annual Retirement Contribution
If you are enrolled in a 401(k) plan, 403(b) plan or any other company retirement plan, inquire with your administrator or Chestnut Planner and make sure to contribute the maximum. If your employer matches, Oh Happy Day! If not, nobody is more responsible for your wellbeing in your golden years than you. If you do not have a company plan, make the maximum contribution to your Traditional or Roth IRA, taking advantage of the additional contribution. The maximum contribution limits for a 401(k) and 403(b) participant for 2012 has been raised from $16,500 in 2011 to $17,000 in 2012 ($22,500 if you are over age 50). For IRA's, the contribution limit remains at $5000 per year with an additional $1,000 if you are over age 50. Consult with your tax advisor as to what plan is most advantageous for you.

Create an Emergency Fund
You should have a side account in a local bank or institution equal to 3-6 months of your household expenses. This will cover you for unexpected wage interruptions, such as short term disability or other unexpected income stoppages. Keep it liquid: you never know when you need a doctor who won’t operate without an upfront payment, or the immediate need for a refrigerator or furnace.

If you've got the above three covered, feel free to breathe and live. Always remember to enjoy each day you have- and sing at the top of your lungs just as if nobody was listening!

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