New Years Resolutions for Your Personal Finances

It is almost time to replace our calendars and that can only mean one thing - time to make some New Years resolutions. Instead of setting the usual goals for weight loss, dedicate some time to thinking about your personal finances. What would you like to change before this time next year?

Use the Sub-prime Mortgage Debacle to your Advantage
If you were one of the ones that signed up with a sub-prime lender to obtain a mortgage, now is your chance to move that home loan to a more traditional financing option and remove some risk from the equation. The slowdown in the housing market has offset the growth in other areas, holding interest rates near an all-time low.

Assuming your credit has improved since taking out the sub-prime or adjustable rate loan you should now be able to refinance your mortgage into a conventional, fixed-rate mortgage at around 6.5%. Even if this is slightly higher than your current interest adjustable interest rate it will benefit you to lock in a low rate and avoid the risk of higher rates in the near future.

Trim Credit Card Fat
The credit crunch taking over Americans' finances is real and was long overdue. Years of economic expansion combined with a real estate boom led to overconfidence in terms of ones ability to assume higher debt loads. With home values cooling, and credit card rates rising, it pays to consider reducing credit card balances and fast. There are several methods of paying off credit cards, but do what works for you and your family.

Rebalance Retirement Savings
The Federal Reserve's inclination to keep interest rates higher than some would like has caused a shift in the stock market over the last year. What has a hot investment (real estate, home improvement, homebuilders, and banks) several months ago has gone cold in the wake of negative financial news to close out the year. That means a review of your retirement plan is probably in order.

First, consider changing up your current allocation mix. Shifting future contributions out of high-risk, high-reward sectors such as real estate and into a more conservative, defensive mix of stocks may be a prudent move. When considering a stock of fund for your portfolio think in terms of goods or services everyone needs regardless of the economic conditions. Healthcare, consumer staples, and energy are all relatively good plays in a weakened economy.

Stop Overpaying Uncle Sam
If you are expecting a big tax refund this year consider revising the number of exemptions on your federal and state payroll tax forms. Receiving a large tax refund really means you loaned the government money interest-free for twelve months. Instead, increase the amount in your paycheck every month and use that money to pay down debt and increase savings.