January is Financial and Identity Fitness Month

Time to reassess, set goals and follow best practices

January 2010

January is a great time to establish good financial and identity fitness.  Not only are you preparing to do your annual taxes, but you’re likely trying to recover from your holiday spending hangover. This is a great time to reassess your financial goals and habits, and put into place best practices to keep on track with your financial goals and maintain a secure identity.

Ask yourself: what more you can do to strengthen your finances? Have you taken the steps to can to protect yourself from identity theft? Built up your rainy-day fund, or paid off any high-interest debts? Since you’re already working out on your calculator this month, try exercising a few more muscles that will result in a healthy financial future for years to come.

You don’t start a workout by walking into the gym and bench-pressing the heaviest weight you can. You have to warm up first. The same is true for your finances. Unless you take the time to create a budget, you could wind up hurting yourself by over-working your credit card. Start by recording how much money you make every month on a piece of paper or computer spreadsheet. Next examine last month’s bank statement and credit card bills. Record how much you’re spending on fixed expenses like your mortgage or rent, car payment, insurance, utilities, etc. Then look at the spending you can somewhat control, things like groceries, restaurants, fuel and entertainment. Next, subtract your spending from your earnings. Do you get a positive or negative number? Are you saving money to meet your financial goals?


Millions of Americans spend more money than they make every month, and covering it up by charging the difference to a credit card. That’s like eating fast food every day. Your might feel full, but you’re slowly killing your long-term health. Even if you save money every month, is it enough to buy a house or save for retirement?

Here’s the easiest financial fitness exercise: Cut spending. All of us have fat somewhere in our budget that we can trim. Instead of going out for drinks with friends, invite them all over to your place. Take the bus to work instead of putting miles on your car. Make coffee at home instead of buying an overpriced frappe-half-caf-skinny-vanilla-whatever every morning. Over time, this simple exercise will result in dramatic improvements in your financial fitness.


Even if it’s just a little bit each a month, save. Create a savings account for a rainy-day fund. Start saving for your next big financial goal, whether it be buying a house or going back to school.


After cutting out extra spending, you may have money left over at the end of the month. As mentioned above, you should save some of that cash. But even if you’re lucky, you’ll only make 2 percent investing that money in a CD or money market right now. Meanwhile, you’re paying at least 18 percent on your credit card debt. And maybe you have student loans or a mortgage with an adjustable rate that’s adjusting straight up.

So start paying it off. And be smart about it. If you have low-interest debt, like a federally-backed student loan, make your monthly payment and leave the rest alone. Timely debt payments will help improve your credit rating. But if you have adjustable-rate loans or debt with interest anywhere above 8 percent, use some of your excess cash each month to begin paying it off faster. That’ll save you money on interest payments, and avoid any nasty interest rate surprises. 


Don’t just jam your credit card bills and bank statements into a drawer. Open the envelopes and read them. That’s the best way to protect yourself from identity theft, since you’ll be able to spot any fraudulent purchases made by someone else using your name.

Top body builders don’t give out all their secret ways to build muscle. So don’t hand over your private data to just anyone. Only carry the stuff you need in your wallet – driver’s license, one credit card. NEVER carry your Social Security card with you. Store all your other credit cards and important papers someplace secure, either in a locked drawer in your house, or maybe a bank safety deposit box. Before you recycle any pieces of paper that contain your account numbers or other private financial information, shred them.

Before sending any e-mails or doing any shopping or banking online, make sure your computer has the most up-to-date anti-virus and malware software. Create strong passwords for e-mail, social networking, and online retail accounts (long, random combinations using both numbers and letters work best). Use different passwords for different sites, and change them periodically. Be careful what kind of information you share on social networking and other sites—nobody needs to see your birthday or home address. And only shop on trusted sites. 


Steroids don’t work in the long run – the only way to stay healthy is to stay active. The same goes for financial scams. Those hand-lettered signs along the highway off-ramp offering “$60K – Work From Home?” Don’t fall for it. Television ads offering cash for gold, or flyers in the mail offering to help pay off your debt? No, thanks. There are no quick, easy shortcuts to financial fitness. Any offer to “Get Rich Quick” will make one person rich: The person who’s scamming you.


Healthy finances can only help so much. Take steps now to prepare your estate. These include: