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Be Financially Fit in 2008

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Money coach Alvin Hall gives advice on how to keep financial resolutions in 2008. Hall tells listeners how to recover from the holidays and keep their bank account intact.


I'm Michel Martin and this is TELL ME MORE from NPR News.

It's January 1st, the start of another year, and that means time to make your new year's resolutions again. You telling yourself, this is a year you'll lose 10 pounds, get engaged, get your finances in order. Well we can't help you with the extra pounds or finding your dream vote, but we can help you get your money straight, we hope.

Here with us to start the new year off right is our money-honey Alvin Hall. Happy New Year, Alvin.

Mr. ALVIN HALL (Financial Expert): Happy New Year. I love that. A money-honey. Oh.

(Soundbite of laughter)

MARTIN: That is just to get us in the right frame of mind.

Mr. HALL: Exactly.

MARTIN: So what are the most important things people need to be doing to address their finances at this time of year?

Mr. HALL: To make only two financial resolutions. One, involving the practical ways you handle your money, and the second involving an emotional challenge. But only make two, write them down and put them all around the house so that you can remember them throughout the year.

MARTIN: Well, give me an example.

Mr. HALL: One, if you are in debt, make this the first year you plan to get out of debt. You're going to set a strict deadline and hold to it. If you haven't been contributing enough to your 401(k) plan, this is the year that you will do that. You'll make the sacrifices in your spending habits so that you can increase that amount. If this is the year you want to save for a house, especially given the number that will be coming available to the market. You want to be disciplined, that will be your single financial focus.

MARTIN: Oh, I see.

Mr. HALL: And the…

MARTIN: So you're okay, some practical, specific goals and…

Mr. HALL: Yes.

MARTIN: …and then you should want to make an emotional goal. What's that?

Mr. HALL: Exactly. The emotional goal is designed to test your metal. How strong you are. How good are you at keeping your promises to yourself.

So every week, schedule a no spending day, that all you will do is get to work, bring your lunch to work, but spend no money for the whole day. Or for a 30-day period, decide you're only going to spend cash for 30 days - no credit cards, do debit cards, no writing checks except for rent and the essentials, but give yourself that kind of emotional challenge to see if you can really stick to it. Because if you don't have that type of discipline then you are highly unlikely to be able to realize your other goals.

MARTIN: That was where I was going to ask you. What is the point of that kind of exercise?

Mr. HALL: That's exactly - to make sure you're strong, to see where your strengths and your weaknesses are. People think that managing money is all about getting the 15 percent, going in to my 401(k) plan, right, about putting money away into a Roth IRAs or other types of retirement plan. But it's really not about that. It's about controlling yourself, sticking to your goals.

Remember that old adage that the people who are often millionaires are not the people who made the money, but the people who saved the money? You could be one those millionaires. You could start yourself on the road to becoming one of those millionaires next door, to borrow a very well known book title, by simply increasing your savings.

MARTIN: Now you talked about practical goals and emotional goals. Let's talk about the practical ones first.

Mr. HALL: Yes.

MARTIN: Some people want to do all those things. They want to reduce their debt, they want to save for a house, they want to increase their retirement savings. How do you prioritize those things? Should reducing debt be everybody's primary - a number one goal?

Mr. HALL: If you are in debt that should be your primary goal, but people can't work on all the emotional fronts at one time. You can't go on a diet, quit smoking, and save money at the same time because you're going to fail at least two of those. So choose the one that is the most essential to your life.

MARTIN: What about on the emotional side? How do you decide what your exercise should be or what your goals - I just tell you from myself. Right around this time, I have a hard time knuckling down. I mean, I am very disciplined throughout the year, but at the holiday time, I feel like I don't want to have yet more tax, I don't want to do yet more paperwork. You know, I want to…

Mr. HALL: Yes.

MARTIN: I don't know. I just don't want to think about it. And yet, this is the time of the year when you sort of have to think about - you have to be picking your insurance choices, you need to be getting your taxes together and all that other stuff. So do you have some guidance for us on how you can kind of, you know, make yourself do the things you don't want to do.

Mr. HALL: First, start out with a list. Part of the problems that people face is when it's in your head is sort of like those 1940s movies where some of the words are bigger than others and it feels some more than you feel others, right? By writing it down, you get to see it in black and white. Then you can prioritize it. Make a list of no more than seven to ten. And then simply every day, do one task. And that's all you have to do. So start by looking at your debt. If you're in too much debt, set up a plan to get out of it. If you need to increase your savings, that's the second priority, then if you need to have the items in your house reassessed for your insurance, that's your third priority. If you have a child and you need to put the money into the 529 plan, that may be your fourth priority.

MARTIN: So don't look at the whole thing as one big task. Break it down into little steps. So, Alvin, what are focusing on this time of year?

Mr. HALL: Well, I have already written all my…

MARTIN: Mr. Perfect.

(Soundbite of laughter)

MARTIN: I hate you.

Mr. HALL: I love you, though.

(Soundbite of laughter)

Mr. HALL: I have already written all my checks to charity so on January 1st, I focus on what would be my fixed expenses for 2008? I look at my mortgage payments, I look at my - the service fees on my apartment, I look at my insurance premiums that I have to pay. And then, I tailor all of my earnings to paying that off.

MARTIN: That's interesting. Now you're essentially an independent contractor.

Mr. HALL: Yes I am.

MARTIN: So I can understand why that's important because you basically have to eat what you kill.

Mr. HALL: Yes.

(Soundbite of laughter)

Mr. HALL: So to speak.

MARTIN: So to speak.

(Soundbite of laughter)

MARTIN: But do you recommend that for people who are not in that lifestyle or do you think that that's just extreme because actually - because other people have more consistent income flows than you probably do.

Mr. HALL: Although I am a freelancer, and my income is uncertain from month to month, I think it's a good exercise for everyone. Look at what your expenses are, look at those things you have to pay. And add to that, your goals, how much you want to save, how much you want to contribute to your kids' 529 plan. And then, set up a first, third, half or three-quarters of the year toward accomplishing those goals. If you can reach that goal by September and October, great, because then the money for the rest of the year is yours to do with what you want.

MARTIN: Mm, that makes sense. Finally, Alvin, I wanted to ask you…

Mr. HALL: Yes.

MARTIN: This is the time of year when there's a lot of promotion around year-end deals like cars, a lot of big ticket items, a lot of the retailers are trying to kind of get inventory out of their stores.

Mr. HALL: Yes.

MARTIN: Do you recommend taking advantage of these kinds of deals or do you think that they just lead you the pressure so they could deal on a deadline may lead you into bad decision making? What do you think?

Mr. HALL: I think often, the pressure to make a deadline will lead you into a bad decision. I think you have to sit down and say to yourself twice or three times, do I really need that new car? Do I really need that item? And often, you discover, if you give yourself some breathing room that you don't really need it. You're just responding to some primal emotion, right? And that four-letter word, sale.

(Soundbite of laughter)

Mr. HALL: Sale. That's what you're responding to. You know, it's going to be on sale in June and its going to be on sale in August and probable in December of next year. If you don't need it now, there's no harm in waiting. And getting yourself into a better financial decision.

MARTIN: Finally, Alvin, we've talked a lot about some of the big financial stories of 2007. We talked a lot about the sub-prime mortgage crisis struggle, about the credit crunch, things of that sort. Are there things that we should be thinking about in 2008? Some sort of the big economic stories that are likely to affect all of our lives as individuals?

Mr. HALL: I think the roll out from the subprime mortgage crisis still has not ended. I think we have been drip said information by the institutions and the enormity of the problem is still not quite fully revealed. So I think people need to be very, very cautious. I also think that people need to be aware of the fact that they need a cash cushion. If the economy slows down more, there may be more layoffs, there may be more job cuts. Those people who have cash in the bank will be able to survive that. And also, in this clearly uncertain economic times with the stock market, sole volatile from day to day, it's very important for you to ask yourself, can I tolerate that risk? Do I want to see the value of my money fluctuate that much? Ask yourself the risk question before you put any money in the investment markets.

MARTIN: Alvin Hall is our money coach. He joined us from our New York bureau. Alvin, thank you so much and Happy New Year to you.

Mr. HALL: Happy New Year to you. I hope to see you in line at the bank putting money in our savings account.

(Soundbite of laughter)

MARTIN: You know, that's right.

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