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Fix your finances for fall

“Today” financial editor and Money magazine editor-at-large Jean Chatzky offers some advice to help you harness that back-to-school spirit with a financial checkup that is sure to help you save a chunk of cash by year’s end.
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Whether or not you’re a parent, September — to me at least — always represents back to school, a chance to buy new pencils, patent leather shoes and make a fresh start. That holds true for your finances as well. Perhaps you’ve let your financial goals slide somewhat since you made those money-oriented New Year’s resolutions in January. Well, don’t worry. If you can get your hands around those goals today — with a solid one-third of the 2003 left to go — you can still make a sizable dent. And that’ll set you up to kick some serious financial behind come 2004.

Don't believe me? Well, I’ll show you just how much you actually can accomplish by getting your act together today, rather than letting it ride through the end of the year.

Blow through your credit card debt: Potential average savings: $480
Or at least as much of it as possible. And do it before the holidays, when you’re likely to ratchet it up again. Americans are up to their you-know-whats in credit card debt. We hold an average of 16 different cards and owe $9,000-plus per household according to Thanks to rock-bottom interest rates, however, eliminating that debt is easier than ever. In fact, right now, no one should be paying more than 10 to 11 percent in interest.

How do you get rid of that debt? Lower your interest rates
It’s always worth asking your current card company to reduce your rate. They may be willing to if you’re a good customer who pays on time or if you threaten to take your business elsewhere. But think twice about the latter if it’s the oldest card in your wallet. The longer you’ve held a card, the higher your credit score, which in turn can help you snag a lower rate elsewhere. If you can’t get a good deal from your current card, transfer your balance to a card with a lower interest rate. Right now, the Discover Platinum Card, which is offering 0 percent through August of 2004 is great for balance transfers. Otherwise, if you’re looking for a card with a low fixed rate, check out the Chase I-Card with an 8.49 percent interest rate. Then try to pay a bit more than you have been each month. You can use some of the other money you save with the tips of this segment to uncover the dollars that will allow you to do that.

How much can you save?
Say you have that $9,000 in total credit card debt and you’re paying interest at a rate of 16 percent. That’s $1,440 annually, or $480 to carry that debt through the rest of the year. Now let’s say you transfer your balance to a 8.5 percent card. Your carrying costs through the end of the year fall to $255. You’ve saved $235. Transfer to a card that is charging zero interest and you’ve saved the full $480 — an amount you then put toward getting you out of debt.

Reduce your fixed costs: Potential average savings: $884
There are a number of bills you pay each and every month — so often, in fact, that you may not stop to think that you could save some money on them. But you could. For example, what interest rate are you paying on that car you’re driving? If it’s above 5 percent you could save money by refinancing your car loan which sounds like refinancing a mortgage but is not only simpler, it’s practically free. A rate reduction of 1.5 percent on a $20,000 car (about average), will save you roughly $900 over the life of the loan and $60 through the end of the year. Check with your credit union or for the best rates. Likewise, if you’re carrying a student loan — and, on average, students are coming out with $17,000 in debt — consolidating your portfolio of loans can reduce your out-of-pocket costs. For that average student, the payment would drop by $56, according to, for a savings of $224 through year end. (And if you remember to pay on time, your rate could fall further down the road.)

Then there’s your mortgage. Despite the fact that the average rate on a 30-year fixed rate loan has jumped to 6.44 percent there are still good deals in mortgages for anyone who hasn’t refinanced recently. Refinance a loan of average size — $170,000 — from 7.5 percent to 6.5 percent and your monthly payment will fall from $1,188 to $1,063, a $600 savings through year end. Refinance into a 5-1 hybrid adjustable rate loan which is fixed for the first five years and then begins adjusting and you can look forward to a 5.24 percent rate for a savings on your monthly payment of $251 or $1,004 through year-end.

Reduce your spending — your way. Potential average savings: Your calls CALL.
Then there’s the issue of how much you’re spending unnecessarily. There are two ways to reduce your everyday spending. The first is by tracking it — keeping tabs of how much you spend on all the little things, lattes, magazines, lunch, trips to the car wash, etc. Trade your latte for a regular coffee and you save $2 a day — that’s $240 between now and the end of the year. Cut out those two magazines you buy — on average — each week and borrow books from the library and that’s another $7 — or $84 by year end. The second way to reduce your spending is by shopping around. The Consumer Literacy Consortium recently tested how much saving a couple of price-shopping phone calls could yield. They found three phone calls save an average of 10 percent on car rentals, 20 percent on TVs and 50 percent on airline tickets. Surely that’s worth a bit of your time.

Invest, invest, invest
And what should you do with all the money you’re saving and not spending? Paying off that credit card debt is one great option, and one with a guaranteed return. After all, paying down a credit card at 14 percent is the same as putting that 14 percent in your pocket. But if you don’t have credit card debt to pay off, invest the money for your own retirement by putting it in a tax deferred account like your 401(k) at work or a Roth IRA. If you’ve exhausted your retirement savings options (though the vast majority of people haven’t) consider investing in an account for college for your kids. If you’re one of those people who scrambles to come up with an IRA contribution come April 15, you can make a big dent by putting a few hundred away each month starting now. To make sure you do it, sign up for an automatic investment program at your bank or brokerage firm that will pull the contributions out of your check account for you.

Rebalance your portfolio for safety
The Dow is up 13 percent since the beginning of the year, the Nasdaq up more than 30 percent. Vanguard’s total bond market index fund (indicative of the bond market as a whole) is practically flat — up .8 percent for the year. What does that mean? If you haven’t adjusted your portfolio since then, it’s time. Why? Because the fact that stocks have gone up so far so fast and bonds haven’t moved means that your asset allocations — the portion of your money you put into stocks, bonds and cash at the beginning of the year are probably out of whack, and chances are you have too much in stocks. If you’re tempted to believe that with the stock market performing so nicely that’s a good thing, think again. That’s precisely what investors enamored of their tech stocks did in 2000 when the markets headed dramatically down. If they had pulled some of their money out of stocks and plowed it into bonds — which did very well — these investors would have suffered a lot less over the last few years. Don’t make that same mistake again.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Information provided courtesy of Jean Chatzky and Money magazine. Copyright © 2003. All rights reserved. For more financial advice, visit the Money magazine Web site at: