Forget Your Money Resolutions! Make a Plan in 2013

Jan. 20, 2013 — -- We live in uncertain times. Uncertainty spooks financial markets and keeps a lid on lending. It gives millions of businesses a legitimate argument to sit on the sidelines hoarding trillions of dollars that could otherwise fuel meaningful economic expansion. That private sector money could fuel the most effective "stimulus program" this country has ever known if only some market confidence could be fostered. But these are all things that are beyond our control.

Some degree of uncertainty is unavoidable when it comes to jobs, raising children, the environment, health concerns and -- unfortunately -- our political system, but there are things that we can control. Our credit profiles are definitely one of those things. If you're serious about getting a handle on your credit, forget making a new year's resolution. They usually fail -- 88 percent of them do, according to some estimates. A well-thought plan, with tangible steps and goals, on the other hand, is a different story.

Before you start rolling your eyes and listing the innumerable things that are confusing and arguably unfair in the world of credit, consider this: For better or worse, your credit is your digital fingerprint for an increasing number of institutions, both financial and otherwise. Rightly or wrongly, these institutions use it to gauge what kind of person you are and that judgment can have a direct impact on your access to money. So your credit is a portfolio not unlike other portfolios you may have.

For example, the investment portfolio is a familiar concept. That's the place where we grow our savings. Credit is also an asset -- part wealth-building tool, and part security blanket. We can build it, nurture it, manage it and protect it, or we can opt to throw caution to the wind and embrace a life of uncertainty so that every credit and job application we submit becomes a Maalox moment. (That's right, some employers do look at credit reports.)

Like an investment portfolio, a credit portfolio takes shape slowly, meaningfully and with deliberation, and when it's not well managed, it can be destroyed in the blink of an eye. Everything from identity theft to job loss, death, illness, irrational spending sprees or unbridled credit binges can tank your score and severely damage your underlying credit profile. But there are simple things you can do to create your credit comfort zone.

When it comes to financial matters, especially credit, new year's resolutions are about as effective as they are long lasting. You need a real plan to build a personal credit comfort zone.

The New Year is always a good time to review past performance and make adjustments for the coming twelve months. What worked? What didn't? Like a football coaching staff reviewing plays and making second half adjustments, we should all be in the habit of these spot inventories.

We've just hit January's midpoint, when resolutions typically fall by the wayside. And that's fine, because resolutions, by their very nature, are for quitters. Plans, on the other hand, are for people who want to get something done. A credit portfolio building plan should consist of several components, all interconnected and each a platform for recovery and financial evolution. Viewing credit as portfolio can help convert the traditional holiday churn-and-burn process from an annual ritual of excess and recovery into a new way of life that works.