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January 13, 2005 10:05 PM

Investment IQ

You've made it to the gym already a couple times this year. You may have even been able to turn your back on piece of chocolate cake. But what about that "other" resolution you made for 2005: getting your financial house in order? "Money Magazine," the publication that named Sioux Falls as America best place to live a decade ago, has a simple test that could reveal how likely you'll be able to stick to you financial goals in the coming year.

According to Money Magazine, the answers to three simple questions could tell whether you're a spender or a saver, a financial whiz or a financial fizz. Question number one: you see a great new mp3 player. You want it, the price is right. But you really can't afford it. Do you buy it anyway? Tom Hodgson of Aberdeen said, "No." Merete Wells of Aberdeen said, "No."

Dana Fisher of Winner said, "No, if you can't afford it, you can't afford it." Amber Larson of Madison said, "No, you don't have the money for it so you can't get it right away." Fisher said, "Save. Save up for it."

A "yes" answer would be a wrong answer, because chances are, you're an impulsive buyer who has too much credit card debt. Experts say putting aside as little as ten-dollars a day can go a long way toward reducing your credit card debt. Financial advisor Jerry Awe said, "You've got to choose to want to get out from under that type of spending habit and depending on what level you're into, you need to set up a system to pay them down.

Question number two: are there things you keep telling yourself you'll get to someday? Like put photos in an album? Make a will? Exercise?

Fisher said, "Yeah, there are. Sometimes I get to them, sometimes not."

Larson said, "Maybe a year later I may actually get it done." Wrong answer!

Hodgson said "Yes." Wells said, "Yes." Wrong answer!

If you answered "yes" to that question, you could be a procrastinator and aren't saving enough money. Experts say you should be setting aside at least ten-percent of your income toward savings.

Awe said, "Look at it as you're paying yourself, anything that you set aside into any type of a savings program that money is allocated to yourself for your future."

Question number three: Do you buy things on impulse, then regret it later? Hodgson said, "Sometimes." Wells said, "Usually regret it later and then decide it's the best thing." Wrong answer!

Fisher said, "I try not to, but I do sometimes though." Larson said, "If I do, I usually return it because I feel so bad." Wrong answer! If you answered "yes," you tend to chase what's "hot, making risky investments that seem to promise quick payoffs instead of investing for the long haul.

Awe said, "If you diversify and allocate your investments across the different types of investments regularly and consistently over a long period of time, that study shows that you don't have to chase the "hot" stocks."

To stick to your resolutions, start a diary that tracks what how you're spending your money. Seeing your expenses on paper will give you a clearer picture of what you can cut from your budget and make 2005 more profitable, and maybe even help you pass this financial test next year.

Other suggestions from Money Magazine: set up an automatic pay plan that deducts money from your bank account to pay off credit card debt. And check your investment portfolio no more than once a quarter. If you get too caught up in the daily ups-and-downs of the market, you'll lose sight of your long-term financial goals.


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