Your Credit Score
Ignore all those TV commercials threatening you with financial ruin if you don't sign up for a credit-report service. There's no need to bother with all that. As long as you review your credit-card statements every month for unauthorized charges, you only need to check your credit rating once a year. (I suggest going to MyFICO.com, which costs $15.95. That's the score most lenders care about.)
Your Home's Value
I'm all for technological advances, but one of the most damaging assaults to our collective financial psyche over the past few years has been the advent of sites such as Zillow.com and HomeGain.com. These services allow you to punch in your address and voilô, up pops an estimate of your home's worth. While the instant gratification was a blast during the 2002–06 housing boom, when prices were climbing into the stratosphere, it's borderline masochistic now that they're falling so drastically.
So let go of your computer mouse and get a grip on what really matters—the long-term performance of the housing market. Even when you figure in the past year's 10 percent dive, the national median price for existing homes has gained nearly 25 percent over the past five years, according to the National Association of Realtors. Over time, housing will revert to its historical norm: an average annual appreciation rate about 1 percent above the inflation rate.
Your Stock Portfolio
If your 401(k) account has lost value over the past six months, I say that's good news: It's a sign that you've invested in stocks, which recently slumped by about 15 percent. Assuming that your retirement is at least a decade away, a stock-centric portfolio is exactly what you need because it offers the best potential for long-term inflation-beating gains. Over the life of the stock market, stocks have gained, on average, about twice as much as bonds or savings accounts.
If you're 55 years or younger, your best strategy in this current market is to do nothing. The biggest mistake I see people make is to panic and bail out when the stock market falls. That exposes them to another risk: missing out on its recovery. All it takes to throw your retirement off course is missing a few good days. Consider that from 1987 through 2007, the S&P 500 stock index delivered an average annual return of 11.5 percent. But if you were to subtract the 10 best days during that 20-year stretch, the return would be just under 8 percent—and if you missed the best 40 days, you'd get only an annual 1.3 percent return.
Don't stop putting money away for retirement, either. Think about it this way: Investing in your 401(k) when the markets are down is akin to hitting the outlet mall—you get more for your money.
The very nature of the insurance business is to capitalize on our fears. And while many types of insurance are absolutely necessary—home and car insurance, to name two—there are plenty of industry come-ons you can ignore, now and forever. For example, it makes no sense to buy life insurance for a child or for an adult without an income. You only need life insurance for an income-earner who is responsible for dependents.
Mortgage life insurance is another one to scratch off your list. This is different from private mortgage insurance (which you need if you borrow more than 80 percent of your home's value). Mortgage life insurance pays off your mortgage if you die. I think it is far simpler and smarter—and typically less expensive—to take care of this through a standard term life insurance policy. Another one to skip is credit-card-loss insurance. If your credit card is stolen or you are the victim of identity theft, your maximum liability is $50—no added insurance needed.
Close cousins of insurance policies are the extended warranties salespeople try to scare you into buying when you make big-ticket purchases. I say forget about them. Consumer Reports recently took a detailed look at these and concluded they are typically a bad deal for consumers. That's because most products don't break down in the first few years, and if you have a complete lemon out of the box, you're going to be covered by the standard one-year warranty you get with most purchases.
This is for all the statement hoarders and receipt keepers whose filing cabinets and closets are bursting with documents from the last century: Let go. You're not going to need most of it, and if you don't trim down, it'll only make it harder to find the really important documents. Here's what to keep, and what to shred:
Keep: Big-ticket receipts. Hold onto receipts for any expensive purchases, such as TVs, cars, and sofas; it will help if you ever need to file an insurance claim for those items. Same goes with receipts for major home improvements. When you eventually sell your house, you will owe tax on any capital gain above $250,000 ($500,000 for married couples filing a joint tax return). But improvements to your home can be added onto your cost basis (what you paid for the house), decreasing your capital gain and thereby lowering—or eliminating—any potential tax bill.
Shred: Paycheck stubs. Here's an easy one: Once you get your annual W-2 and verify that it's correct, you can toss all your pay stubs from the past year.
Shred: Old tax documents. The IRS will only go back six years for most audits, so as long as you're an upstanding citizen (and aren't committing fraud), you have my permission to dispose of your 2002 returns and any before that.
Shred: Investment-account statements. For savings accounts, 401(k) plans, and other investments, chances are your bank and/or broker offers online statements, so confirm that you can get access going back to day one and then get rid of the paper versions. That said, it doesn't hurt to print out your year-end summary and tuck it away. Also, if you've ever made a nondeductible contribution to a traditional IRA, you'd be wise to keep that paperwork. You want to have proof that you've already paid tax on the contribution when it comes time to make a withdrawal.
Shred: Credit card and ATM receipts. Check that your monthly statements correctly report all your transactions, then fire up the shredder and get rid of all the receipts from that month.
The current average cost of a four-year education at a private college is just a tad shy of $100,000, so you're probably wondering why I have this on my don't-worry list. It's simple: You should focus on your retirement, not your kids' college costs. There's plenty of financial assistance-about $130 billion every year, according to the College Board-to help pay for your children's education. But there are no federal loans or scholarships to help out people who haven't saved enough money for retirement. Make it your priority to build financial security for retirement, and I promise that when the time comes, your kids will be grateful that you don't need to rely on them.
There's one last thing I'd like to add. If you take an honest look at your possessions, I'll bet you'll see a lot of purchases that were made for appearance's sake. The home-entertainment center you put in your family room last year had to be better than the one the Joneses down the street installed two years ago, right? And isn't your closet always filled with the hot shoe/bag/outfit du jour? When keeping up appearances comes at the expense of saving for emergencies and for retirement, you are heading in the wrong direction, financially.
Remember this: The single most powerful way to ease your concerns is to stop trying so hard to impress others with your money. Take good financial care of yourself and your family, and I guarantee that you will have much, much less to worry about.
More Advice from Suze: Get 10 tips for a fresh financial start