Suze Orman Money Matters

1. Play the Match Game.

More than 20 percent of 401(k) plan participants don't invest enough to get the maximum company matching contribution. That means about one out of every five plan participants is unwisely turning down a bonus.

How much you have to invest to get the employer match -- and how much your employer will match -- varies at each company. A typical setup might be that for every dollar you invest, your boss will kick in 50 cents, up to an annual limit of $1,500. So if you sock away $3,000 each year for your retirement, your employer will add $1,500. That's an immediate 50 percent return on your savings.

Ask your HR department or the plan administrator how much you need to invest to get the maximum company match. Then change your contribution level to qualify for this incredible benefit.

2. Limit Your Company's Stock in Your 401(k).

I don't care if you work for the most fabulous company in the most dynamic industry. No one should have more than five to 10 percent of their investments riding on one stock.

The real culprit here is your company. Recent research found that 65 percent of company stock in 401(k)s is the result of employer contributions. But now we know better. Thousands of Enron and WorldCom employees saw their 401(k)s full of company stock melt down to nothing when accounting scandals came to light.

Most businesses will allow you to sell the company stock they give you. Once sold, you can move the money to other investment options in your 401(k) plan.

3. Go for a Roth IRA.

If your income makes you eligible for a Roth IRA and you don't have any credit-card debt, I can't think of a good reason not to invest in a Roth. It's that good a deal.

Remember, it's not 2006 we're focused on, it's 2026 or 2046. That's when a Roth shines: Your withdrawals will be completely tax free. Meanwhile, every cent you withdraw from your traditional IRA is going to be hit with income tax.

So if you're single and have adjusted gross income (AGI) below $95,000 or you're married and file a joint return with AGI below $150,000, and have paid off your credit-card debt, invest the full annual limit in a Roth. It's $4,000 for singles and $8,000 for married couples that file a joint return. Anyone over 50 can make higher contributions: $4,500 in 2005 and $5,000 in 2006.

4. Dump Expensive Funds.

Loads of people are smart enough to own no-load mutual funds, but many still throw away money by not paying attention to the annual expense ratio.

That's something every fund charges you, but it's easy to miss because it doesn't show up on your statements as a line-item fee. Instead it's subtracted from your fund's performance behind the scenes. The return you see on your statement is after the expense ratio has been deducted from the fund's gross return. The average expense ratio for managed stock funds is 1.5 percent.

Smart market watchers tell us we'll be lucky if stocks' long-term gains average 8 percent a year. So if your fund has a gross return of 8 percent and it shaves off 1.5 percent for expenses, you're left with just a 6.5 percent return. Fees have swallowed up more than 18 percent of your funds' return!

That's why it's smart to buy index funds or exchange traded funds (ETFs). With annual expense ratios of just 0.2 percent or less, you're going to hold on to a lot more of your returns.

5. Protect Your Home.

If you haven't carefully read your homeowner's insurance policy in the past year or so, you could be seriously jeopardizing your biggest investment.

Even before the massive losses caused by Hurricanes Katrina and Rita, insurers were scaling back policies to make it harder for homeowners to receive payouts that would cover their true rebuild costs in the event of a total home loss.

You should have an extended replacement coverage policy, where your payout can be more than the current value of your home. Find out what it would actually cost you to rebuild your home today. If your policy doesn't cover that amount, raise your current level of insurance.

6. Get UnARMed.

In some parts of the country, more than half the new mortgages taken out over the past few years are interest-only or adjustable rate mortgages (ARMs). These were attractive at the time, but mortgage rates are already nudging up. As I write this, they're above 6 percent.

That means if you have a 4 percent adjustable rate mortgage, you better get ready for a big hike. And no one expects rates to go down anytime soon, so don't feel smug even if your adjustment isn't until 2007.

If you have an ARM or interest-only mortgage and plan to stay in your home for a while, make it your primary financial priority to convert to a fixed-rate mortgage. If you plan to move in the near future, consider a hybrid mortgage with a fixed rate that mirrors how long you'll stay. For example, if you plan on moving in five years, consider a 5/1 hybrid, where the initial rate will not change for the first five years.

7. Dump 'Universal Default' Credit Cards.

The term may not ring a bell, but "universal default" could be costing you a lot of money.

Under the universal default policy, your credit card issuer scours your accounts every month, looking for any instance where you've tripped up. If they find a blemish, they'll use it as an excuse to change the rate on your credit card. A car payment that's a day late can be enough to jack up a zero-percent intro rate to 15 percent, 20 percent, or more. In some cases, the default policy can even be triggered by an application for a new credit card or mortgage.

Almost half of credit cards issued use the universal default policy. Call customer service to find out whether yours does, and if so, seriously consider transferring to a card that doesn't. (http://finance.yahoo.com/creditcards )

8. Watch Your Identity.

It's horrible to have your credit card hijacked by a thief who runs up charges on your account. Even worse, someone can steal enough of your identity -- social security numbers are typically all they need -- to open accounts in your name. Either way, your credit score can be ruined, and it can take months -- if not years -- to clear your good name and credit report.

It's not necessary to pay a company to "monitor" your credit report when you can do it yourself by carefully reviewing your credit report and credit card statements. You're entitled to one free annual report from each of the three credit bureaus, Equifax, Experian, and TransUnion. Check one report every four months, and you have yourself a free monitoring system.

In the meantime, consider signing this petition imploring lawmakers to change the existing laws to give consumers more protection against identity theft.

9. Insure Your Family's Well-Being.

You should use life insurance to make sure your family is safe should tragedy strike. All you need is term insurance. Ignore anyone who tries to sell you a super-expensive policy with a name such as whole life, variable life, or universal life.

To be very safe, I recommend buying a guaranteed annual renewable term policy with a death benefit equal to 20 times the income you want to replace if you were to die. So if your beneficiaries need $50,000 in annual income, you would want a $1 million policy. A healthy 40-year-old male can get a 20-year policy for about $1,000 a year.

Next, get yourself a living revocable trust. A will can be useful -- but only if it's accompanied by a trust. Not only is a trust a great way to manage your assets while you're living, but it makes the inheritance process incredibly smooth. An estate attorney can draw up a straightforward trust for less than $1,500. Or you can use a computer program to draw up the document, and then simply hire an estate attorney to review it.

10. Values Are Your Ticket to True Prosperity.

Net worth is important, but money alone will never make us happy. So ask yourself questions such as: "What's the goal of life?" "What's the goal of having money?"

Everyone will come up with a different answer.

For me, the goal of life is to leave more for others when we go than was originally here when we arrived. It's your values and what you do with what you have that will connect you to who you really want to be.