One of the first and most important financial planning steps is to start or add to ones emergency savings account.  These funds are set aside so that when the unforeseen yet inevitable expense arises, one is prepared. A wheelchair repair expense, the 3AM emergency veterinary visit or paying for the long-put-off home maintenance all can arise without notice.

For most people, the greatest barrier to saving is not being in the habit of saving! According to bankrate.com, “The best way to get in the habit is to pay yourself first by directly depositing money from your paycheck into a dedicated savings account. This can be done concurrently with your goals of paying down debt or saving for retirement. You won't miss what you don't see, and putting your savings on autopilot is a great way to reinforce your money saving habits.”

For that emergency savings account, there are three factors of which consumers should be aware. First, be sure that the funds are liquid, that you can get to the money easily. In addition, be sure the account is not subject to any investment risk, and pays a rate of return capable of keeping up with inflation. An FDIC-insured, high-yield savings account meets all three of these requirements. Check Bankrate.com's search engine for the highest-yielding, FDIC-insured savings accounts available nationwide.

Get yourself a free checking account.
It has been estimated that up to 50% of people with disabilities do not have a checking account.  Instead, many of these people utilize so-called check cashing or payday loan services.  According to the New York Times, the average national cost of cashing a check at one of these establishments is $40 per check.  For someone who gets paid bi-weekly, that is an annual cost of $1,040.  That is money that could be put toward savings, retirement or used to fund an IDA. 

Even if you have a checking account, bankrate.com reports, “The average interest-bearing checking account charges a monthly service fee of $12.55 and requires a balance of more than $3,300 at a near zero rate of interest to avoid fees.” Many people are surprised to learn that there are in fact a plethora of FREE checking accounts which do not have per-transaction or minimum balance restrictions. Many of these accounts are offered through small community banks and Credit Unions. Visit Bankrate.com's tips on avoiding fees and use the search engine to find a free checking account that meets your money-saving needs.
 

Create a realistic Budget!
This is one of those “I know I should” issues in personal finance.  Much like drafting a will, getting more exercise and avoiding the junk food emporium, everyone knows they should build a system to track their spending.  Start by following your spending for at least two months.  This will provide the data necessary to learn where you can reduce spending and how you can increase savings outcomes and develop a realistic spending plan.  Make it a game, at the end of each month; compare your actual spending to the budget you worked out.  Use this information to better refine your financial goals moving forward.


Pay down that credit card debt!
For most people, paying down credit card debt is one of the safest and most important steps to building a secure financial future. With current rates ranging from 12% to 24% paying down this debt is arguably like earning the same percentage return on savings. According to bankrate.com, “Plowing excess cash into repayment of credit card debt is a double-digit, risk-free return because it reduces the outstanding balance and the resulting interest charges. This is a sound move now as credit card rates will only move higher over the next two years. Use Bankrate.com's debt pay-down calculator to develop a custom, month-by-month plan for repaying your debt.”

Start or increase your retirement savings.
Despite the economic downturn, many employers in both the public and private sector still provide incentives for employees to save for retirement. 401k, 403(b)’s and various flavors of IRA’s often provide employees with small employer matches and substantial tax benefits for plan participation.  Many of these programs link the employer contribution to the employee’s participation in the plan.  Fail to take advantage of these opportunities is in essence, leaving free money on the table.  Often, even contributing 1% - 3% to a retirement account can trigger a matching contribution to your long-term retirement savings plan.  This monthly savings results in the proven investment strategy of dollar-cost averaging: buying fewer shares when values are high but more shares when prices fall. Do not forgo free money, check with your workplace and start or increase your retirement savings now!

Refinance your home into a fixed rate mortgage.
As we write today, interest rates are at record lows, and one thing is certain, eventually they will move higher, much higher. This makes now the perfect time to trade in your adjustable rate mortgage for a low fixed rate mortgage. Bankrate.com suggests this strategy even if your mortgage is not due to adjust for another year.  They point out that “you may trade away another year at 3.5 percent to 4 percent, but you permanently insulate yourself from the inevitable scenario of higher interest rates.”

Homeowners who are upside down and can refinance through the Home Affordable Refinancing Program, or HARP, should move quickly to refinance as that program is scheduled to expire in June 2010. Check out Bankrate.com's free search engine to find the lowest fixed mortgage rates in your area.

Another tip, is when refinancing, be sure to refinance only the remaining term. Too many consumers simply accept a new 30 year mortgage, re-setting the mortgage freedom clock back to 30 years. If you have had your current loan for five years, simply ask the lender to amortize the loan over the remaining 25 years.  If you can afford the payments, you can even consider reducing the loan term further, saving thousands of dollars in interest while bringing the day of mortgage freedom much closer.

Another reason to hurry and refinance, is that According to bankrate.com, The Federal Reserve plans to stop buying mortgage-backed securities by the end of March. Most mortgage experts believe that rates will rise when mortgages go off Fed support as private investors require higher rates to compensate for the risk.