It's a new year, which means it's time to get your finances in order! Ariel Investments' Mellody Hobson shows you how.
Mellody's 3 Tips on How to be Fiscally Healthy in 2013:
1. Know What You Own
You need to know what accounts you have and what's in them. Start by getting familiar with your 401k plans. If you have a spouse or significant other, you both should be aware of what you own. Whether it's money in stocks or different investments, it's important to get your head around it all so you're completely aware what money you have. You would be surprised how many people don't! Many people have been laid off and often times when that happens, they lose track of what they own (i.e. 401k plans from their previous job). You want to make sure that you roll all of those accounts into an IRA.
2. Know What you Owe
Ultimately, I recommend that people have just ONE credit card but the reality of it is that the average American owns 4 different credit cards. Know what you owe on each one of those. Now is when all the bills from Christmas shopping start rolling in! I recommend paying the debt off the credit card with the highest percentage rate, first.
3. Know Where you Want to Go
Many people just look at what they need to do "Day-To-Day". This is paying your bills, keeping a roof over your head, buying food, etc. From there, you should think about the "Year to Year" and reassessing everything. Take a look at what you're investing. The most important thing is to look at where you're going "Long Term". You need to try to assess what you're going to need when you retire. All of this work is for not, if you retire poor. Ideally, you should start looking at this and figuring it out the second you get your first job. The younger you start, you can save less each time and end up with the same amount in the end. Start now if you haven't been doing it. This is not one of these things that are like wait until X to start saving. You have to start now. Doing nothing is the worst possible thing. Even though the issue can look very daunting? just chip at away at the problem. If you commit to saving small amounts now, you can get more aggressive later on. Just do SOMETHING! Start by saving 50 cents a day for three months, and then increase it to a $1 for three months, and work your way up to saving $10 a month. You'll be surprised how quickly It will all add up. You can't get to an end point unless you know where you're going!
Check out these websites for tips on retirement and how to pick out which IRA is right for you: www.morningstar.com/cover/invest-for-retirement.aspx and www.mint.com/ira-center/
Mellody is responsible for firm-wide management and strategic planning, overseeing all operations outside of research and portfolio management at Ariel Investments (www.arielinvestments.com). Additionally, she serves as chairman of the board of trustees for Ariel Investment Trust.