Keep Guiding Principles Near and Dear
December 21, 2002

It's almost time to say goodbye to 2002. It's been a tough year. A bear market. Corporate Accounting scandals. A recovery that feels all too much like a recession. The return of federal budget deficits. The ongoing war against terror.

Now, when it comes to the economy and markets in the New Year, my own view is that the odds favor a growing economy and, most importantly, more "help wanted" signs from Corporate America. The stock market should manage a modest advance, and inflation will stay low.

Of course, all forecasting bets are off if we invade Iraq.

That said, the transition from one year to the next is a good time to revisit the basics of personal finance. So here are some guiding principles that I highlighted last year.

Keep your money matters simple. Simplicity is a virtue when it comes to managing money. The more complicated the strategy, the more people waste time and money.

Create a plan. Few of us like the idea of designing a budget. Yet a financial blueprint helps transform your goals into action. You're in control of your finances with a plan.

Make a will. Let your wishes be known in case something happens to you.

Manage your debts. For far too many people, personal finance means getting out of credit card debt.

Invest for the long haul. Trading is hazardous to your wealth. Ignore the buzz on Wall Street. Put your energy into figuring out how much of your portfolio to invest in the basic assets like stocks and bonds. Keep costs low.

Diversify. Diversification builds a margin of safety for tumultuous times.

Give to charity. I like the idea of weaving your personal philanthropy into the basic fabric of your financial plan.

Have fun. Don't forget why you embarked on this personal finance journey in the first place. Saving to save is just as bad as spending to spend.

And last, but not least, happy holidays!

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