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A checklist for procrastinators to get financial house in order

Published Aug. 24, 2005

Want to be wealthier and wiser in 2005? The best time to get started on your goals is always today. Procrastination is a big obstacle to financial fitness for many of us, myself included. That's why I'm offering some financial resolutions for the new year especially for us procrastinators. If you do all these things, congratulations. If not, pick one or more to tackle for the new year.

+ Read your account statements as soon as you get them. You may discover you are being charged fees you didn't know about. And if there's a mistake, it's important to call right away, because a delay could cost you the opportunity to correct it.

+ Set your own minimum payment on credit cards. Yes, it would be nice to have a grand plan to eliminate your debt. But until you get around to developing one, here's something to do right now: Each month pay at least the amount of new charges and that month's interest. Otherwise, you will be going deeper into debt.

+ Organize your tax records. Create a file for those forms and statements that will be arriving in the mail in the coming weeks. And if you're feeling ambitious, set up a system for organizing your 2005 records as you go.

+ Start saving sales tax receipts. If you itemize, state sales tax is deductible in 2004 and 2005. You can use the amount from a tax table or the sales tax you paid. If you're a big shopper, your receipts might prove profitable.

+ Deal with your investment mistakes. Don't hang on to a losing investment hoping for a comeback without good reason to expect one. Sell and select another investment.

+ Make retirement savings a priority. Figure out how to carve some extra savings out of your budget and increase your savings plan contribution at work or through an IRA. Today.

+ Take care of your will. If you don't have a will, or the one you have is out of date, this is the year to get your estate plan in order. Call a lawyer this week to set up an appointment.

+ Get ready for next hurricane season. Four hurricanes weren't enough to motivate you? Check the adequacy of your homeowner's insurance (it needs to be enough to replace your house, not including the land) and be sure you have a readily accessible emergency fund to cover expenses until you get that insurance check.

I have $3,000 I want to put in the stock market in 2005. Should I put it in my Roth IRA and invest in an index fund or should I put it in my brokerage account and buy $3,000 worth of shares of Merck or Pfizer?

I favor the Roth IRA regardless of what type of investment you choose. Roth contributions are made after-tax, but distributions are tax-free. This year you can contribute up to $4,000 ($4,500 if you are 50 or older.)

I think most people would be better off sticking with index funds rather than trying to pick winning stocks or funds. However, I am not against including a few stocks or actively managed funds in a portfolio that's largely index funds. If you've done your research and want to follow one of these stocks closely, you might find stock ownership very educational.

You mentioned in an earlier column that the lifetime exclusion from gift taxes is $1-million. If I am correct, this figure is $1.5-million and will increase again in 2006. Did I misunderstand?

Yes, but you can blame it on Congress. The gift tax and the estate tax exemptions are not as unified as they used to be. The lifetime gift tax exemption is $1-million. The estate tax exemption is $1.5-million, increasing gradually to $3.5-million in 2009, repealed in 2010 and reinstated at $1-million in 2011, unless Congress changes the law.

Here's how it works: You can give away $11,000 per person per year without gift tax consequences. When you give more than that, you have to file a gift tax return, but you do not have to pay gift taxes until the gifts reported on those returns over the years add up to more than $1-million. The gift tax exemption you use during your lifetime is subtracted from your estate tax exemption at death.

Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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