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This Year, Get Fiscally Fit!

During the holiday season itís easy to fall into the trap of overspending. But now the new year has arrived Ė and so have the bills. Make it your New Yearís resolution to get your finances in shape. Here are some tips:
  • Get rid of excess credit cards. Too much credit is the downfall of many households. Donít let it defeat yours. Keep only the credit you need and use it wisely.
  • Pay down expensive credit-card debt. The interest rates on most credit cards are in the double digits. If you are making only the minimum payment each month, it could take years to pay off your debt.
  • Pay yourself first. Carve out a percentage of income that automatically goes into your retirement savings plan, savings account, or other investments. Paying yourself first guarantees that your immediate and long-term financial goals are on track. In addition, try to save a percentage of bonuses or tax refunds.
  • Refinance your mortgage. Refinancing your home mortgage at a lower interest rate can save you a substantial amount of money over many years of payments. Also, depending on your equity in the home, itís a way to consolidate debt you may be carrying at a high interest rate. But it is important to understand that refinancing only makes sense if your monthly payments will recoup the costs of refinancing within two or three years.
  • Have an emergency fund. Create an emergency fund by directing some of the money you use to pay yourself into a savings or money market account. The goal is to have enough set aside to support yourself for three to six months without your regular source of income.
  • Use your benefits. Know your employee benefits and take full advantage of them. For example, by contributing as much as you can to your THRIFT savings plan, youíre making the most of the tax advantages gained by saving in the plan. Flexible spending accounts that allow you to set aside pre-tax dollars from your pay for medical, child-care, and commuting expenses are another example.
  • Shop around for insurance. Take some time to call competitors of your auto and homeowners insurance companies. You may find better coverage for a lower price. Just make sure youíre checking policies of comparable quality. Also, you can sometimes get a discount by purchasing several insurance polices from the same carrier.
  • Continue child-care payments. If you pay for preschool child care, keep paying as much of that money as possible into an education investment account when your child enters grade school. Redirecting it will pay off later and can be used for the childís benefit.
  • Update your spending plan. Once you establish a spending plan, review it quarterly to make sure youíre on track. You will have to fine-tune the plan and make adjustments as circumstances change. But over time it will become one of your best money-management tools.
More Information

If you would like to learn more about living within your means, call a Vanguard® Participant Services associate at 1 (800) 523-1188 Monday through Friday, from 8:30 a.m. to 9 p.m., Eastern time, and ask for the Vanguard Financial Education Series® Budget and Debt Management brochure. You can also find a variety of information at www.vanguard.com under the Planning & Advice tab.

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