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Humberto Cruz
It's time for my annual surefire predictions for the New Year. As usual, I won't waste your time predicting what the stock market will do, since nobody knows. Instead, I'll concentrate on predictions you can do something about:
Saving "Solutions" Sought
With millions of Baby Boomers lacking the means to retire, we'll see a growing national debate on how to encourage if not force Americans to save, along with calls to simplify the tortuous maze of workplace and individual retirement plans.
But you don't need to wait. If you're not sure whether it's better to save in a 401(k) plan or an IRA, for example, just pick one, or better yet, both.
Don't use the excuse that markets are treacherous not to save. You can pick stable investments rather than stocks.
And don't agonize so much that you become paralyzed. If you can't decide between paying down debt or adding to your savings, do a little bit of both. But do something.
Fuming Over Fees
Despite threats of additional government regulation -- or maybe because regulations have slowed profits -- banks will continue to increase fees, drawing ire from consumer groups.
Whether these fees are justified goes beyond the scope of this column. I just want consumers to be smart as well as irate.
Consider: An annual survey by Bankrate.com, a consumer education site, found that average automated teller machine fees jumped 5 percent to an all-time high of $2.33 in 2010, and average overdraft fees increased 3 percent to a record $30.47.
"Consumers can find themselves wasting several hundred dollars a year by not taking simple steps to avoid those fees," said Greg McBride, senior financial analyst for Bankrate.com. Among those steps are keeping track of their bank balance to avoid overdrafts and staying away from out-of-network ATMs, which charge $1.41 more per transaction on average.
Bubble Trouble?
Just as investors piled into tech stocks in late 1999 and early 2000, and went into hock to flip condos in 2005-2006, they will flock to whatever investment is "hot" in 2011, increasing the risk of getting burned. Through the years, this self-destructing investor behavior has never changed.
I don't know whether we'll have any "bubble" burst in 2011, and if so, where. I do know that with interest rates near historic lows, long-term bond mutual funds pose particular danger now.
That's because interest rates can rise much more than they have room to fall, and bond prices go down when rates rise, with longer-term bonds falling the most. Most Americans are not aware of this inverse relationship between bond prices and yields, according to numerous surveys.
A better strategy: Put together, and periodically rebalance, a diversified portfolio of stocks and bonds suitable to your goals and risk tolerance.
It's Time to Say Goodbye
After writing this weekly column for 20 years, I will leave you with a final thought next week and "fully" retire by the end of the year.
This is a natural progression from my decision to retire from full-time work in 2000 at age 55 and write this column from home. Doing so cut my pay but gave me more time for family, hobbies and travel. Having turned 65, I want to devote still more time to newly discovered passions, including playing and writing music and learning about art and other fields. That's why I saved, and why you should, too, to be able to fulfill your passions and dreams.
Available at Amazon.com:
Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Financial Goals
The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living
Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back
Happy at Work, Happy at Home: The Girl's Guide to Being a Working Mom
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Personal Finance - Time to Make New Year's Financial Resolutions