Gearing Up for 2009

I love this time of year. There seems to be a collective calm as everyone comes off their post-holiday binges, savors the last few hours of vacation and takes a cautious peek at the new year.

The sales out there don't hurt either.

If this is the year you've decided to get started organizing your finances I have a few belated gifts for you. The hardest part of getting started is finding the tools that make the most of your attention span. Here are my three favorite tools for getting organized whether you prefer the written word, the web or the all-powerful spreadsheet:

1. You Have More Than You Think by Tom and David Gardner. This light-hearted, informational guide was written by the two happy blokes who started the Motley Fool. The book was published during its venture-capital-rich high times when they could afford to educate the masses for free. Ah, the good old days. You Have More Than You Think is a pleasant, easy-to-follow guide that covers investing, making large purchases and other financial events. There's even a guacamole recipe in it. Definitely borrow this one from a friend or the library.

2. Microsoft Excel. As a professional money tracker I think of tagging and categorizing expenses as a good time. For some reason, Quicken and Microsoft Money ruin it for me. Excel is simple, everywhere, and by creating one worksheet per month you can easily compare expenses from one month to the next. I have the entire year's expenses in one workbook that I update Sunday mornings (remember, this is fun for me). I spend less time formatting and more time analyzing where I can get more bang for my buck.

3. The Millionaire In The Making column on CNNMoney. I've been following this column for years as it highlights what real people are doing to build piece of mind along with wealth. Beware the recent iReport link - it is the American Idol way of letting people publicly apply to be featured in the column and is more noise than wisdom. Go to http://millionaires.blogs.cnnmoney.cnn.com/ for actual featured families. Though your situation may not match any of these potential millionaires you still get insight as to the thought process that helps them grow rich. Try not to be discouraged by the couples who preferred to go childless and retire early - parents get rich, too.

These tools have served me well and I pass them on to you. Happy New Year, be safe, and I wish you a prosperous 2009.

First Aid for Retirement Portfolios

For the past year the economy has been rubbing salt on our wounded investment portfolios. Most of us have stuck it out while some are shaking their heads on the sidelines with their portfolios halved, sitting in cash, waiting for the next sure thing. With pundits pounding their chests about the worst recession since World War II they are also claiming that it will all be over by the end of 2009. Not 2010 or 2012, but all of twelve months away. And when the turnaround hits, you're going to want your money there when it happens.

Check Expenses, Not Balances

The first thing to do is to take a look at your portfolio. Do you even know what you're invested in or what it costs? If you've been hiding your unopened statements in a drawer it's time to open them up. Don't look at the balances, just Google the funds to find their expense ratios. If your funds are charging you more than 1% and this is the first time you've looked at your accounts in six moths, seriously consider index funds.

The Lazy Investor's Best Friend

Index funds are groups of stocks that track portions of the economy and they are great low-cost, long-term, low-maintenance investments. Unlike mutual funds with an investment manager constantly buying and selling stocks, index funds are managed by computers who work for cheap. Thus the lower expense ratios. Anyone who doesn't want to spend hours every week tracking their investments or their investment managers should take a close look at index funds and put their long-term investments to work. Most index fund expense ratios are under 1.00, also called "1 percent" or "100 basis points." Most actively managed funds will run you 1-2% in annual fees.

Money for Nothin'

With Treasury rates swirling the drain you can expect any interest you are earning on your savings to drop with them. Hopefully your bank's rates will stay afloat, but if not, fight the urge to take your savings and do something "productive" with it. Keep your cash where it is. If you use it to pre-pay debt or replenish your retirement funds and something happens you'll have to turn to credit cards to keep you afloat. Remember, the purpose of an emergency fund is to keep you from emergency debt.