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Strategies & Market Trends : Groundhog Day -- Ignore unavailable to you. Want to Upgrade?

To: Shoot1st who wrote (5728)	9/9/2002 6:03:14 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 6346

bloomberg.com Pay Debts, Balance Life After 9/11 Commentary. John F. Wasik, author of ``The Bear-Proof Investor,'' is a columnist for Bloomberg News. The opinions expressed are his own. By John F. Wasik Chicago, Sept. 9 (Bloomberg) -- The events of Sept. 11 bring to mind the words of poet T.S. Eliot: ``All time is unredeemable.'' It's important to ask how the passage of time has changed our behavior and what's become important to us. One almost universally expressed priority is the need to balance work with the rest of our lives, which is a sentiment that's easy to express and hard to act upon. A few actions will make work less necessary and the fruits of life more obtainable. One approach is to reduce the time we spend working by curtailing the need to earn money. Unfortunately, we spend more time working to buy more things. Then our working hours often increase so that we can pay down credit card debt, which is averaging more than $8,000 per household in the U.S. alone. Total U.S. personal debt rose to a record $11.2 trillion at the end of the first quarter from $11.1 trillion at the end of 2001. Like the disquietude of going to work in the past year, deep debt also disturbs our life. An Ohio State University study found that those stressed out over debt -- usually from credit cards -- were in worse health than people without debt problems. ``Credit-card debt may be a more sensitive barometer of financial well-being than income because it may tap into more long- term deprivation,'' the study's authors stated. In an age of anxiety, debt is needlessly adding to our emotional burden. Reducing Debt and Anxiety Examining personal debt is one way of restoring harmony. If your consumer debt -- non-mortgage debt such as credit cards, auto and other installment loans -- exceeds 10 percent of your annual income, you need to pay it off. Don't take the slow approach to paying off your debts, either. Let's say you had a $3,000 debt and you paid the minimum $60 monthly payment. It will take you eight years to pay off the debt -- even if you never charged another dime to the card. In that period of time you will have paid an additional $2,780 in interest, according to bankrate.com, a personal finance Web site. What if the debt was instead $3,000 in savings? You could invest the maximum contribution in a tax-deferred Roth IRA if you are married and your household income is below $150,000. You would be able to withdraw the money tax-free after age 59 1/2. Assuming you invest that $3,000 every year over the next 30 years in a stock-market index fund and had an 8 percent annual return, you would end up with savings on the order of $360,000. Debt reduction means you can save more. Savings allow you to prepare for emergencies and work less in the future. It's a simple formula to increase your personal freedom. A New Look at Risk It may be that one of the greatest emotional casualties over the past year was trust in our employers. We've been become overdependent upon our employers for our financial well-being, and that needs to change. Ray Seghers, director of research for Aon Consulting's Loyalty Institute, has studied employee attitudes since Sept. 11. The topic touches close to home: The consulting practice is an arm of Aon Corp., an insurer that lost 175 employees in the attacks on the World Trade Center in New York. Shortly after the attacks, worker loyalty to employers rose, given the nature of the times and questions about the economy. That trust eroded over the next few months with accounting scandals and bankruptcies of major companies. ``It's caused employees to say of employers, `Can I trust you?'' Seghers said. Knowledge Builds Trust Trust is a by-product of knowledge. To trust your own decisions, you need to understand how debt dictates how much you must work. You can't trust your employer to give you unvarnished advice about your personal finances. Seek the advice of a credit counselor if your debts are overwhelming. Two sources include Consumer Credit Counseling Services at debthelpnow.org or Myvesta at myvesta.org. Find a fee-only financial planner at napfa.org. If Sept. 11 taught us anything, it's that sometimes we need support and should ask for it. Fortunately, most of what you need to do you can do yourself. -- With the savings from your reduced debt burden, contribute more to your short-term savings and retirement plans. You can contribute as much as $11,000 in 401(k), 403(b) and 457 plans this year and an additional $1,000 if you're over 50. -- Even if you're self-employed, plans such as the Keogh and SEP-IRA will allow you to contribute up to $40,000. -- Update your life insurance and estate plan. You need to cover the basic expenses of your dependents after your passing. -- Try to keep at least six months' of expenses in cash in case you lose your job. That means investing in a money-market mutual fund or certificate of deposit. For the best rates, check imoneynet.com or banxquote.com. You Still Have Time It's not possible to know what the future holds. That doesn't mean you can't prepare for it. If you're not saving now, time and compound interest are in your favor. Let's say you are age 35. Even if you only have $10,000 and can earn a modest 6 percent annual return, saving $993.35 a month will produce a million dollars by age 65, according to the bloomberg.com savings calculator. There's comfort in knowing you can prepare for some financial emergencies and enhance your personal freedom by paring debt and working less. It provides a small measure of redemption in uncertain times.