Five Golden Rules

If you can believe it, we're just almost done with the first quarter of 2007 and that means two things: the cherry blossoms are coming out and it's time to hunker down for some spring cleaning.

As you tackle the clutter in your home, why not clean up your finances as well? This is a great opportunity to start planning for a solid financial future. You've just paid off your taxes (or are about to) and you're well entrenched in your job plans for the year.

Don't let that momentum slip. Here are my financial rules for 2007 to help you tackle your finances and start the rest of the year on the right foot.

This is the column that will help keep you on track. My little space isn't going to make you rich -- no one can do that other than yourself. But twice a month, in the weeks ahead, I will keep you focused on the issues that will matter to your financial future.

I will go over ways to start a financial plan -- no matter what your situation is -- how to save well and save smart, and give you tips and advice on everything from saving while on vacation, to how to protect yourself in an economic slump.

People who know me say I am an unfailing optimist. Don't confuse that with happiness. Optimism is a trait with which you need to tackle everything in life -- whether it is dealing with your naughty children, or coping with a layoff.

Optimism is what helps people take control of their lives. And nowhere do you need optimism and control more than when it comes to your financial future. To help you start, let me offer five rules for a more prosperous life.

Five Golden Rules

1. Lose everything (your debt, that is). Make 2007 the year you pay off all your credit card debts. If you are saddled with school loans, make it a goal to pay 25% more than the monthly payment. If you have savings but a load of credit card debt with high interest rates, take your savings (apart from 6 months' worth for a rainy day) and pay off the debt.

There is no point in earning 3% interest when you are paying 12% on your credit cards. But most importantly, the biggest reason why you need to get rid of debt is that you can't take control of your financial future while someone else has a claim on your money.

2. Save, Save, Save! After paying off your bills, make sure to set a savings plan. Financial guru David Bach, author of The Automatic Millionaire, talks about "paying yourself first." What he means is getting into a regular schedule of saving automatically every time you are paid.

Whether you pay yourself immediately when you get your wage or after you have cleared all your monthly expenses, you need to create a savings target and stick to it. Don't get bogged down in the details, such as the percentage or exactly how much -- do what you can.

Once you get into the habit, saving will become an automatic part of your financial strategy. And as I'll explain in later columns, it's often your savings behavior rather than your investment strategy that will make the greatest impact on your future.

3. Insure yourself (and your family). Nothing spells financial disaster more than when someone is hit with a health crisis without proper insurance coverage.

Make sure your policies are up to date. Read all the terms of what is and is not covered. Insure your home and valuables. Adequate coverage is something too many people think about only when it is too late.

4. When everyone jumps in, stay out. I learned this lesson the hard way. When I was living in the United States and the tech frenzy was reaching fever pitch, I put US$15,000 into a hedge fund that bet long on tech stocks. Needless to say, I should have just thrown that money in my fireplace and at least had the benefit of some warmth.

When your friends, family and great aunt/palm reader start talking about how great X stock or the Hang Seng are doing, it's time to hold onto the cold, hard cash.

5. Be financially confident. This rule is more for women. For some reason, it has been drilled into our heads that dealing with finances is a complicated, daunting task, when it really isn't. On a personal level, taking care of your finances is mostly simple common sense. Yes, you need to do some reading -- not all of it very interesting -- but a few hours of study for a lifetime of prosperity is a small price to pay.

The most important thing is to be financially confident that you can take control of your future. How do you do that? Start reading! Buy the finance books from today's gurus -- Suze Orman, David Bach, Robert Kiyosaki. They all pretty much espouse the same concepts, but their most important impact will be in making you feel in control and confident to tackle financial issues.

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