Financial Makeovers for 2009

It's time to put 2008 behind us and focus on what's ahead.

As last year showed, there's much that is way beyond our control when it comes to our financial lives. But there are many things we can control, and that should be our focus in 2009.

Now is a great time to take action on those things that will improve your financial life regardless of what the markets do this year.

Looking for financial advice? Click here to send David your questions, and they might end up as a topic for his next column.

To help you get this year off to a good start, I solicited suggestions from financial planners around the country. Here's some of what they recommended:

Follow the money: "One thing that everyone can do whether they make $40K or $400K is to track their spending," said Buz Livington of Livingston Financial Planning Inc., in Santa Rosa Beach, Fla. "You can't plan for retirement if you don't know how much money you are spending now."

He recommends software programs like Quicken and Microsoft Money to make a tedious process easy.

For the highly motivated, Cheryl Krueger of Growing Fortunes Financial Partners LLC, in Schaumburg, Ill., recommends tracking your spending in detail for one week, down to the quarter given to a child for a gumball machine.

"You'll be surprised at what you're spending without even realizing it. Get your partner in on the act and have a discussion about what you've observed, then see what changes make sense for you."

Reduce debt: In a time of market uncertainty, paying down debt provides a guaranteed rate of return. The interest charges you avoid on a mortgage, an auto loan or a credit card can mean as much to your net worth as comparable rates of return earned on investments.

A particular mutual fund might earn 12 percent this year, it might not. But if you pay down a credit card charging 12 percent, that's guaranteed savings.

"If possible and when possible, pay a bit extra on your mortgage principal every month, or a few times a year as extra cash is available," suggests Katie Weigel of LongPoint Financial Planning LLC in Concord, Mass.

She suggests tackling credit card debt across multiple cards by paying particular attention to the card with the highest interest rate.

"Many people find that if they focus on that one card, making substantial payments on it each month while making the minimums on the other cards, they feel a much bigger sense of accomplishment."

Steve Juetten of Juetten Personal Financial Planning LLC in Bellevue, Wash., recommends that those in credit card debt start 2009 with a specific goal. "For example, get rid of at least one credit card with a balance owed by April 1 and another by July 1. Then track your progress."

Jeff Kostis of JK Financial Planning in Vernon Hill, Ill., agrees that goals should be specific rather than general, and says to include rewards along the way to celebrate successes. "For example, you may want to treat yourself to a Starbucks coffee if you are able to save the $25 every week for four consecutive weeks," he said.

Reduce expenses: To spend less than you make, of course, you need to either make more money, cut expenses or some combination of both.

On the expense reduction side, Regina Galvin Ballinger of Ballinger Financial Services in Needham, Mass., makes two suggestions.

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