Smart Money Moves For The New Year

Like many Americans, Sheret Payton has a cash flow problem. She adheres to a budget, but it rarely seems to cover all of her expenses. The 24-year-old Chicago native lives at home with her father and has a 4-year-old son, Robert, to care for. A conscientious adult, Payton pays rent, tithes, and for childcare and groceries — all on her $12-an-hour job as a medical collections representative in Olympia Fields, Illinois. She has even managed to start setting aside $100 per pay period. “I really want to start saving,” she says. “I have two accounts, and in one I direct deposit $100 for savings every pay period. But it seems like I always use it.”

Payton has only been on her current job for seven months so she hasn’t accumulated much. Every now and again, she dips into her savings account because “something always comes up.” But she knows that won’t cut it if she wants to reach her goals. “I eventually want to buy a three-flat home. I’d rent the other two [units] out and live in one while I still work and go to school at the same time,” she says. “I’m not trying to make any excuses for my situation; I’m just trying to help myself in any way possible.”

Most consumers could use some help these days. Increasing energy costs, the onset of inflation, higher interest rates, and stagnating wages have all begun to pinch our bottom lines. So whether you’re an entrepreneur with a startup, a seasoned investor, or you have a limited income, here are a range of actions you can take to move your financial fortune forward in 2006.

Build a financial plan. It’s important to start the year off right by understanding where you are going. David A. Hinson, president of Wealth Management Network, says creating a real financial plan with a professional financial adviser or setting up your own financial budget will get you on track to meet your financial goals. Brent Neiser, a certified financial planner and director of collaborative programs at the National Endowment for Financial Education, says creating a financial plan early is important because many people may have experienced major adjustments in 2005 that could affect their financial situation. You may have changed jobs, bought or sold a business or some real estate, received an inheritance, or started planning for a child’s education. These changes could require you to come up with a new financial strategy.

Update your inventory of personal items. Neiser says people should take video footage of their personal belongings to protect their assets. “With the hurricanes, we saw the value of having a good inventory record when filing claims,” he says. “Walking around with a digital camera lets you narrate the items you have and even make statements about the history of some items, or their significance in your family.”

Begin budgeting for special, planned expenses. It’s a good idea to set aside money for big purchases you have planned for 2006, says Neiser, such as