Issue date: Dec 25-27, 1998

[Jean Sherman Chatzky Archive:]

The best moves you and your money can make in 1999

Ask Jean Chatzky about your money. Starting next weekend, Contributing Editor Jean Sherman Chatzky will write a biweekly personal finance column for USA WEEKEND. She'll cover topics from Internet shopping ("e-tailing") to interest-rate cuts, and answer your questions on the money matters you care about most. Chatzky, editor-at-large for Money magazine and a contributor to NBC's Today show, is one of the nation's leading personal finance experts. Send your questions to: Jean Chatzky, USA WEEKEND, 1000 Wilson Blvd., Arlington, Va. 22229-0012, or e-mail finance@usaweekend.com. Jean Sherman Chatzky Archive Photo Credit: Erica Freudenstein for USA WEEKEND

Jean Sherman Chatzky, USA WEEKEND's contributing editor on personal finance, outlines the latest strategies to make your new year a richer experience.
Parlay $10 into serious money.
Outsmart your credit card company.

n just a year, we start a new millennium. Isn't it time you got your finances in shape? Good news: It's far from impossible. Better news: It may not even take much time. I consulted with experts across the world of money management to develop this list of the best moves to make in 1999. Adopting even one or two could make a world of difference, not only to the cash you have to spend today - but also to the health of your financial future.

Do your own investing.
Studies show individual investors do about as well as pros, and there's no doubt you can save big on commissions. Thanks to the Internet, individual investors have access to volumes of information, much of it as good as (or better than) the stuff brokers disseminate. You can place a market order for up to 5,000 shares online for as little as $7.95 (you'll typically pay three to four times that much if you do it through a discount broker). The big caution: Be sure you are not "churning" your account by buying and selling too often. A recent study from two University of California-Davis personal finance professors noted that the average discount brokerage consumer lost 1.5 percent each year simply by trading too frequently.

Pay yourself first - electronically.
If you wonder where to get cash to invest, follow the tried-but-true advice to pay yourself first. But take advantage of automation: Systematic plans that pull money out of your paycheck or checking account automatically each month make saving a goal you actually can accomplish. Most banks, brokers and mutual-fund families offer this service, some with a minimum investment of just $25 a month. Or try a lower-tech approach. A favorite of Harvard, Mass., financial planner Dee Lee: Cut back on takeout food. If you save $5 a day, that's $1,825 a year. Invest it at 8 percent for 30 years and you'll have $229,000.

Avoid your own Y2K problem.
The financial services industry has been working harder than most to make sure you don't have year 2000 problems at the end of 1999. But there's no guarantee. It could be especially troublesome if you find yourself trying to chase down financial records at the same time corporations are struggling with their computers. So get organized early: List all your bank and credit card accounts, with the "800" numbers for customer service, and keep all your monthly statements. And though it may sound extreme, put some mad money in a drawer before 2000 rolls around in case ATMs shut down for a day or two.

Invest abroad.
This may not be popular advice right now, but, says San Francisco money manager Tim Kochis, "When no one thinks it's a good time to be investing in a particular part of the world, it's generally the best time." Indeed, research shows investing abroad not only increases the return of your portfolio over the long term but also lowers the risk. For overseas investments, your best bets are mutual funds with a long track record (check the Morningstar ratings in your local library or at www.morningstar.net on the Web) that invest broadly rather than in one country or region. You may even want to test the waters with an emerging-markets fund, Kochis says.

Refinance your mortgage.
Right now, rates are floating around 30-year lows. So if your loan has an interest rate of 712 percent or higher, it's time to head back to the closing table. In most areas, says Keith Gumbinger of HSH Associates, you now can find no-point, no-closing-cost deals on 30-year fixed-rate mortgages at around 7 percent, cutting payments on a $100,000 loan by $408 a year if your current loan is at 712 percent.

Don't be tempted by one-year adjustable-rate loans. They are less expensive than fixed-rate mortgages, but not by enough to make them a good deal. Consider a 15-year fixed if you can afford the additional monthly outlay (about $200 on a $100,000 loan), but disciplined investors likely can do better by putting that cash into the market. "All you need to outperform your mortgage is a pre-tax return of about 7.5 percent," says Kochis. "Over the long term, the stock market should deliver a solid 10 percent."

Max out your 401(k) contributions.
According to a survey from the consulting firm Watson Wyatt, 87 percent of companies offering a 401(k) retirement plan match some portion of workers' contributions. That's free money. Your goal, says Dee Lee, author of The Complete Idiot's Guide to 401(k) Plans, should be to boost your contribution to the maximum allowed. If you can't get there overnight, she suggests raising the amount you put in by 1 or 2 percentage points every six months until you reach the limit. Or increase your contribution each time you get a pay raise. If you're self-employed or moonlight on your own payroll, consider opening a tax-deferred Keogh retirement plan. It's one of the best ways to shelter earnings.

Get an insurance checkup.
"Most people have too much life insurance, too little disability and the wrong deductibles," says New York-based financial planner Gary Schatsky. For singles, especially, disability is more crucial than life insurance - if you're hurt or ill and can't work, you have no one to fall back on. On the deductibles front, Schatsky notes that the goal of insurance is to avoid disaster, not to ensure you won't lose a penny if something happens to you. So it's probably best to raise the deductibles on your home and auto insurance policies to $500 a year (unless you're a bad driver who's bound to have accidents!). Bottom-line benefit: 15-30 percent savings on your car policy, 12 percent on your home.

Parlay $10 into serious money Consistent investing can make you a lot of money over the long haul. Assuming a conservative 8% return on your investments ...

If you put away $10 a month for 10 years, you'll have $1,851.66.

If you put away $10 a month for 20 years, you'll have $5,939.47.

If you put away $25 a month for 10 years, you'll have $4,629.14.

If you put away $25 a month for 20 years, you'll have $14,848.68.

If you put away $50 a month for 10 years, you'll have $9,258.28.

If you put away $50 a month for 20 years, you'll have $29,695.36.

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Outsmart your credit card company How much can you save by making more than the minimum payments on your credit cards? A lot. Here's an example for someone carrying the average total debt of $2,200 on a bank credit card. We're assuming that the minimum payment is $66 (3% of charges, which is typical), that the interest rate is 18%, that you start making payments right now - and that you don't keep charging while you pay off the balance.

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